The worldwide smartphone market may be in a slump, but the iPhone 13 is still doing well, and Apple anticipates even stronger sales for the iPhone 14 when it goes on sale.
Apple’s slightly higher projections for the next iPhone 14 reflect Wall Street analysts’ growing conviction that the Cupertino, California-based company’s sales will likely fare better than those of the larger smartphone market if major economies experience a recession.
According to Reuters, people with direct knowledge of the situation said Apple, which releases its fiscal third quarter results report on July 28, communicated its expectations to suppliers in preliminary forecasts as it undertakes trial production of the iPhone 14.
Analysts feel that because Apple is at the upper end of the market, its relatively wealthy customer base has not been as negatively affected by inflation in basic goods like food and fuel. Charles Hsiao, head of Fubon Securities Investment Services, and other industry observers predict a general slowdown in consumer electronics demand this year and the following year.
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The smartphone market has already been severely impacted by China’s economic slowdown, with global sales in May—the most recent month for which complete data is available—dropping 10% year over year to 96 million devices. According to the company, this is just the second time in almost a decade that the monthly total has fallen below 100 million phones.
However, despite indications that market demand for rival smartphone manufacturers is slowing, two iPhone supply chain sources with firsthand knowledge of the situation told Reuters that iPhone sales had remained strong in July.
One of the sources stated that “others are beginning to take a hit.”
According to the second source, one factory’s iPhone 13 shipments in July were a third greater than they were in July of the previous year. This pattern was particularly odd because consumers typically purchase less existing iPhone models in July and August as they wait for Apple to introduce new models in September.
The second source stated that “based on shipment, sales of iPhone 13 are fairly excellent.”
According to Cowen analyst Krish Sankar in a letter to clients, the iPhone has continued to sell well deep into its cycle in part because “China demand rebounded rapidly once lockdowns ended and the iPhone was a beneficiary” of a June shopping holiday in China.
Apple has begun trial production of the iPhone 13’s replacement in accordance with its yearly timeline with the intention of ramping up mass production in August so the smartphones may begin delivering in the fall. According to the second source, the initial shipment predictions Apple has provided suppliers are “somewhat higher” than those for the iPhone 13 from a year ago.
It’s a bit higher than it was last year. The second source described it as “excellent, but not explosively good.” Even while numbers are higher at some specific plants, some Wall Street experts are anticipating a modest dip in iPhone 13 shipments for the recently finished fiscal third quarter. Analysts still anticipate the iPhone will outperform its competitors, though. For the most recent quarter, Cowen anticipates Apple smartphone shipments to be down approximately 1% while global handset shipments might be down as much as 13%.
Apple’s supply chain is being affected by the market split between Apple and Android.
According to Song Myung-sup, analyst at HI Investment & Securities, “for Samsung’s display unit, a better-than-anticipated performance in Q2 is projected due to shipments for iPhones, which is the sole smartphone with robust sales.”
Cowen maintained its “outperform” rating on Skyworks Solutions’ stock, noting that Apple accounts for around 55% of the company’s sales from a radio component used in the iPhone. In contrast, Qorvo, a competitor of Skyworks, benefits more from the Android phone market and receives 30% of its revenue from Apple. Qorvo’s rating was cut by Cowen to “market perform.”
In a note to clients, Cowen analyst Matt Ramsay stated that “Skyworks’ increased relative exposure to Apple in its mobile business likely insulates the company in the near term from significant implications associated with… negative demand revisions.”
