Following poor sales of its newest smartphones, Apple reported a 15 percent decline in iPhone numbers for the December quarter. The company blamed it on the worsening diplomatic relations with China and the weakening economy of the far eastern country. However, if an investor note is to go by, Apple’s worst days would soon be behind it.
iPhone XR Inventory Finally Begins Clearing in China but the More Expensive Models Are Still Struggling
According to UBS analyst Timothy Arcuri, the iPhone inventory is now clearing in China, presumably because of price cuts. Procurement estimates for the iPhone XR have actually gone up for the June quarter, which is not typical for a new model in this stage of its cycle. The signs of inventory burn have caused UBS to raise its estimates for iPhone shipments for the next quarter from 32.5 million units to 34.5 million. However, this increment is mostly based on the prediction that the sale of old models such as the iPhone 8 and iPhone 8 Plus will pick up in the coming months.
The company also estimates the demand for the cheapest of the 2019 bunch, the iPhone XR to go up by 3 million in the June quarter. However, this would probably be offset by the decreasing sales of the iPhone XS and the iPhone XS Max. UBS has revised its revenue estimates to $50.4 billion from $50 billion, although the average selling price is expected to go down from $683 to $655, as older and cheaper models are expected to sell more than the new, exorbitantly priced ones.
Although the sales of the pre-2018 iPhones are expected to be up by 5 million in the March quarter, there is expected to be a corresponding decrease in the shipments of the 2019 iPhone lineup, and thus UBS hasn’t revised its shipment estimates of 40 million units for the current quarter. Due to an expected surge in the sale of older models, average selling price has been reduced to $687 from $711 and the iPhone revenue estimates have been revised to $29.2 billion from $30.2 billion.
Although UBS’ latest note hints that things will get better for iPhone sales in the coming months, other analysts may not necessarily agree. For instance, HSBC has cautioned investors that Apple sales are going to slow down further in China as the consumers are switching to Huawei and Samsung from iPhones. However, as Tim Cook said, we will have to wait and see how the price cut strategy works in China.
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