Ming-Chi Kuo Says iPhone XR Demand Has Been Lower Than Expected, Slashes Shipment Estimates

iPhone XR demand has been lower than expected, according to Apple analyst Ming-Chi Kuo, who has slashed his overall iPhone shipment forecast by 20 percent for the first quarter of 2019. He now expects Apple to move 38-42 million iPhones in the quarter, down from his original estimate of 47-52 million.

iphonexr
Kuo, in a research note with TF International Securities, obtained by MacRumors:

We have reduced our 1Q19 iPhone shipment estimation by 20% to 38–42mn units (vs. our previous forecast of 47–52mn): We cut the 1Q19 iPhone shipment estimation again for the following reasons. (1) Lower-than-expected XR demand. We have reduced our 1Q19 XR shipment estimation to 15–20mn units vs. our previous forecast of 20–25mn units. (2) The increase in orders of legacy iPhone models cannot offset the decline of XR and XS series shipments because of the low season impact.

Apple reported sales of 52.2 million iPhones in the first quarter of 2018, which corresponds with the second quarter of Apple's fiscal year, so as few as 38 million units in the first quarter of 2019 would be a significant year-over-year decline.

For the iPhone XR in particular, Kuo has revised his shipment estimate to 15-20 million for the first quarter, down from 20-25 million.

Kuo estimates annual iPhone shipments will fall between 205 million and 210 million in 2018, and based on that, forecasts that annual iPhone shipments in 2019 will decline up to 10 percent to a range of 188 million to 194 million. This would fall below Wall Street's consensus estimate of around 212 million units in 2019.

While this news paints a pessimistic outlook for the iPhone, declining unit sales will likely be at least partially offset by the rising average selling price of iPhones. Apple's latest iPhone lineup is its most expensive yet, with the $349 iPhone SE discontinued and the iPhone XS Max topping out at $1,449 with 512GB of storage.

Kuo:

We believe that the iPhone ASP could at least keep growing YoY until 3Q19, and it will offset the YoY shipment decline. However, most suppliers will face growth challenges due to iPhone shipment decline. We believe that specific suppliers can grow, thanks to the component price increase or the ability to obtain new orders, but the visibility of the beneficiary list will not be clear until 1Q19 because some spec and order allocations of 2H19 new iPhone models are not confirmed yet.

Apple will no longer be disclosing unit sales in its quarterly earnings reports going forward, so investors will have to look towards iPhone revenue to determine how well the handset is selling. If unit sales are particularly bad, then a rising average selling price might not be enough to hide the weakness.

Apple has been aggressively marketing its latest iPhones. On its website, for example, the iPhone XR and iPhone XS take up the entire homepage with advertised starting prices of $449 and $699 respectively. However, each have an asterisk that leads to fine print that says pricing is based on an iPhone 7 Plus trade-in.

iphone xr apple homepage
Apple's earnings results for the first quarter of 2019 will likely be released in May, so we're still some time away from real numbers.

Related Roundup: iPhone XR
Related Forum: iPhone

Top Rated Comments

MacFather Avatar
34 months ago
Deleted.
Score: 70 Votes (Like | Disagree)
cristianvaldez Avatar
34 months ago
The greed in price increases is starting to take a toll. They should lower the prices or people are going to switch to Android or look somewhere else.

Apple needs more innovation and less greed. Go back to Steve Jobs days maybe?
Score: 56 Votes (Like | Disagree)
Pepe4life Avatar
34 months ago
Next up:
iPhone XR for $99*

*after kidney trade-in
Score: 56 Votes (Like | Disagree)
newyorksole Avatar
34 months ago
Jeez. Apple Stores also have easels holding up a poster about “XR starting at $449”. Never seen some type of promo like that.

I really hope they learned their lesson this year. Sheesh.
Score: 49 Votes (Like | Disagree)
usersince86 Avatar
34 months ago
Decrease the price (and/or the size) and sales will increase.

And don't make us trade in a phone.
Score: 48 Votes (Like | Disagree)
newdeal Avatar
34 months ago
Hopefully Tim Cook can have a good idea as to where to go next. Releasing new products at higher prices than the old products and keeping the old products available around the same price didn't really seem like a thing that Jobs did. Generally if they were releasing a computer or a phone it was the same price or lower and then if they kept the old one around they would drop the price. Doesn't seem to be happening anymore.
Score: 28 Votes (Like | Disagree)

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