Worrying sign? Apple tells suppliers that consumer demand for the iPhone 13 has slowed, ahead of important holiday season
The share price of Apple has taken a hit after it reportedly told its parts suppliers that demand for the iPhone 13 lineup has slowed.
This warning from Apple was reported by Bloomberg on Wednesday, which cited people familiar with the matter.
It should be remembered that Apple in October had scaled back iPhone 13 production by as much as 10 million units (down from a target of 90 million units), due to the ongoing global chip shortage.
But now Apple is confronting a different issue, namely slowing consumer demand, which could signal that consumers have decided against acquiring the hard-to-find handset.
Apple had been hoping to make up the shortfall of 10 million units next year, Bloomberg reported, when supply is expected to improve.
But Apple is now reportedly informing its vendors that those orders may not materialise, according to the people, who asked not to be identified because the discussions are private.
This will be especially concerning for Apple’s management, as the firm heads into its normally highly lucrative holiday season period, where it traditionally sells a lot of units.
That said, Apple is still reportedly on track for a good holiday season, with analysts projecting a sales increase of 6 percent to $117.9 billion in the final three months of the calendar year.
But it won’t quite be the blockbuster quarter that Apple – and Wall Street – had originally envisioned, Bloomberg reported.
So why is consumer demand for Apple’s latest shiny handset slowing?
Well it seems that shortages and delivery delays may have frustrated many consumers. While inventory has improved of late, it is reported that consumers in the US have had to wait about a month for the Pro model.
Now wait times are said to be down to two weeks or less.
This, coupled with inflation, plus the omicron variant of Covid-19, is triggering fresh concerns for shoppers, and they may forgo some purchases, it is reported.
What will concern Tom Cook is that this could translate to users skipping the iPhone 13 altogether and waiting for the iPhone 14.
Another issue could be that the new iPhone 13 and iPhone 13 Pro range does not really offer many ‘must have’ new features, other than a better processor and improved battery life on some models, and of course the inclusion of MagSafe technology.
Indeed, when Apple spends a lot of talk bigging up its camera improvements during the handset launch in September, it signals it doesn’t really have much other functionality to talk about.
Even the screen notch cutout remains on the iPhone 13, although it is a bit smaller than previous models.
Apple’s shares fell 1 percent in pre-market trading in New York, it was reported.
To be fair, Apple has been warning of supply issues for quite a while now.
Tim Cook in May this year had warned he expected global chip shortage to constrain supply of the new iPad Pro and iMac.
Then in July when Apple was reporting its excellent third quarter results thanks to heavy consumer spending on its products throughout the Coronavirus pandemic, Apple did give a heads up to a looming problem.
Tim Cook at the time warned silicon “supply constraints” would affect sales the iPhone as well as the iPad.
He added that the shortages were not in the high-powered processors that Apple has manufactured for its devices, but in what’s called “legacy nodes,” or chips that do everyday functions like driving displays or decoding audio, and can be manufactured using older equipment.
The chip shortages, coupled with stressed global supply chains, has put immense pressure on multiple industries including car makers and tech giants.
Last month Asia Nikkei reported that Apple had drastically trimmed its iPad production, in order to feed chips to the iPhone 13, and ensure it could still make the smartphone handsets.