Apple reportedly tells suppliers that demand for the 5G iPhone 13 series is waning
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Bloomberg reported tonight that Apple has informed its component suppliers that demand for the iPhone 13 series has been declining. Citing people familiar with the matter, the news organization said that part of the problem is that consumers no longer feel like waiting for long delivery times to shrink (more on that below). The global chip shortage and supply chain issues have impacted Apple and the company has reportedly cut iPad production in half to use chips and other components to build its higher-margin phones instead of tablets.
Apple allegedly told suppliers that iPhone sales that it was counting on next year may not take place
In October, Apple reportedly decided to cut 2021 iPhone production by 11% from 90 million units to 80 million. Anonymous sources said at the time that both Broadcom and Texas Instruments were not able to ship the number of chips that Apple had ordered from them. The latter makes a chip that powers the iPhone's AMOLED display. Lead times in the chip industry have risen to 21.7 weeks compared to nearly 12 weeks at the same time last year.
Apple CEO Tim Cook expects a $6 billion hit from the global chip shortage
Apple had hoped that it would be able to make up the 10 million units it cut from production sometime next year. But now, those in the know say that Apple is telling its suppliers that those orders next year might not take place. These sources asked to remain anonymous since Apple's talks with its suppliers are not public.
Still, Apple expects to report a 6% increase in revenues during the fiscal first quarter of 2022 to $117.9. Consumers, upset over shortages and long delivery times, are re-thinking their phone buying strategy. Some are deciding to wait until next year's iPhone 14 line which is expected to be made up of a 6.1-inch iPhone 14, 6.7-inch iPhone Max, 6.1-inch iPhone 14 Pro Max, and a 6.7-inch iPhone Pro Max.
With the changes expected next year, consumers will reportedly have the chance to purchase a lower-priced 6.7-inch iPhone without the premium "Pro" touches. And some buyers expect Apple to possibly do away with its controversial notch on one or more models. But what is also causing sales to decline is the reduction in savings that consumers were able to obtain through carrier deals when the handsets were first available to be pre-ordered.
A poll taken in Japan revealed that a whopping 66.3% of respondents said that they would not upgrade to a phone in the iPhone 13 lineup compared to only 54.4% who said the year before that they would shun the iPhone 12 series. Last year, 15.6% of those surveyed in the country said that they were all-in on the iPhone 12 while only 11.9% said the same thing about the iPhone 13.
Lead time for the iPhone is now down to one to two weeks
During the conference call that followed Apple's fiscal fourth quarter and 2021 results, CEO Tim Cook said that demand for new products-particularly the new iPhone models-was "very robust." Cook did point out that the global chip shortage would cost it $6 billion in revenue during the holiday quarter."
Apple's partners have also had issues. TSMC, the foundry that produces Apple's chips, said that October sales declined 12% on a month-to-month basis to the equivalent of $4.8 billion. Last month Foxconn, the company that assembles most iPhone and iPad units, said that it expected softer business this quarter. It blamed the shortfall on the chip shortage.
With more and more consumers deciding against ordering an iPhone because of the long wait to get their new phone delivered, those lead times have dropped. A check with the online Apple Store shows delivery times for iPhone 13 Pro models down to one to two weeks.
Not too late to buy the Google Pixel 6 or Pixel 6 Pro
Another possible factor is the release by Google this year of the Pixel 6 and Pixel 6 Pro, both priced to undercut the iPhone. In addition, this is the first time that the Pixel models have been made with Google's own Tensor chip allowing it to include several features on the phones that you won't see on an iPhone, at least without installing an app.
Apple's shares hit a new all-time high earlier Wednesday at $170.30. However, the shares declined over the afternoon to close at $164.77, down 53 cents on the day.
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