Apple's Orders for iPhone 12 Components Complicated by Unclear Consumer Demand
Amid the ongoing pandemic in the United States and other countries, Apple is continuing to forge ahead with work on its upcoming iPhone 12 devices, which are expected to feature 5G connectivity, new 3D cameras, and other features.
With travel restrictions to China, Apple is experiencing difficulties preparing for its new devices and placing orders for components, according to The Wall Street Journal, and one factor Apple is dealing with includes predicting consumer demand.
Apple's new iPhones don't come out until December, but production and preparations begin months in advance. Former employees who spoke to The Wall Street Journal said that Apple's operations team places orders for camera module and other components in March and April, with orders based on how many iPhones Apple expects to sell in a given year.
The orders that are placed dictate how many devices Apple makes, and with the ongoing pandemic, consumer demand "has never been more unclear." Millions of people are out of work and others live in fear that their jobs might not be available in the future, which could lead to cutbacks in new iPhone purchases.
The question of consumer demand looms large for Apple Inc. as it prepares to unveil a new low-price iPhone model and soon must begin ordering components for its latest flagship smartphones, which usually are launched in the fall.
The fall iPhones, which this year were expected to garner significant consumer interest because of the use of 5G wireless technology, make up a sizable portion of Apple revenue.
Many companies are struggling to determine consumer demand due to the lockdowns across the world, which have left businesses with many unknowns about what the future holds. If Apple over-orders and is stuck with extra expensive 5G modems or unsold 5G iPhones, it could cut into the company's profit margins.
Susquehanna analyst Mehdi Hosseini told The Wall Street Journal that Apple is likely having component suppliers make iPhone parts as planned, and that it will reassess demand in May or June. This is in line with reports from iPhone suppliers like TSMC that have said Apple has not cut orders at this time.
As Apple prepares to launch new iPhones this fall, it is said to be "scrambling" to prevent product delays, and there have been mixed reports in recent weeks with conflicting information on whether or not the iPhone 12 will launch on time. As mentioned in earlier reports from Bloomberg and The Information, Apple's engineering team is conducting business using photographs and video calls for prototyping purposes. Apple has also allowed some engineers to take home prototypes of future products, which Apple has never previously allowed, all in an effort to continue work as usual.
Even if new 5G iPhones launch on time this fall, Apple could have a difficult time persuading customers to replace their old devices given the economic uncertainty. The low-cost iPhone that's in the works, which could be priced as low as $399, could be enticing, but it won't bring in as much money as Apple's much more expensive flagship devices. We'll likely learn more about Apple's plans and the current economic impact on the company's bottom line when it holds an earnings call later this month.