Apple’s iPhone production appears to have entered the first quarter of 2019 largely unimpeded by sales injunctions and other factors, although the company is expected to ship fewer iPhones in 2019 than in 2018.
In a memo obtained by AppleInsider, Cowen research analysts stated that the recent injunction has had a “negligible impact” on the supply chain. Qualcomm recently obtained a ban on some older iPhone models for patent infringement, but it is anticipated that these models will account for only 25 percent of units produced in the current quarter. Apple has also released a software update to circumvent the issue, despite Qualcomm’s efforts to extend the injunction to the iPhone XS and XR lines.
Apple may have shifted its product mix during the December quarter to favor the iPhone XR and iPhone XS Max. Cowen has increased its combined estimate for these iPhones by 1.5 million, contributing to total iPhone shipments of 73.5 million. The company maintains its forecast for the March quarter at 44 million units.
In January, Apple typically slows iPhone production due to its focus on the fall launch and holiday windows. If Cowen’s forecasts are accurate, predictions of extra cuts in November and December appear to be more seasonal than anything else.
In recent months, other research firms have been bearish on Apple, fueled by hints that 2018 models are not selling as well as anticipated. Recently, Jeffries reduced its stock price target from $265 to $225.
Citi, Morgan Stanley and UBS are among the other firms reducing their estimates.
Early Cowen forecasts for the entirety of 2019 indicate that Apple will ship fewer than 200 million units, representing a 7 to 10 percent decline year-over-year. Although Cowen did not immediately identify a specific cause, the smartphone industry has begun to level off.
Additionally, iPhones have become quite pricey, which may have an impact on demand, but given Apple’s target market, perhaps not significantly. The 64-gigabyte XR costs $749, which is $100 more than Apple’s formerly standard entry-level price. An XS costs a minimum of $999, while the XS Max begins at $1,099 and rises to $1,449 for a 512-gigabyte model, which is more than some Macs. This problem is exacerbated by the fact that Samsung and Chinese brands such as Huawei and Oppo offer cheaper alternatives in foreign markets. Apple is believed to dominate the “premium” market for devices that cost at least $400.
