Apple has delicate iPhone inventory dance ahead

Apple has delicate iPhone inventory dance ahead

Summary: Apple has a few tricky supply chain items to navigate. First, most smartphone buyers know a new iPhone is coming and won't buy an iPhone 5. Apple needs to generate sales of the iPhone 5 and keep inventory levels in check.

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Apple is reportedly cutting iPhone builds in the quarter ahead due to growing retail and carrier smartphone inventory levels, according to an analyst.

Jefferies analyst Peter Misek on Monday cut his iPhone estimates based on his checks in Apple's supply chain. Misek said that retail and carrier inventory levels are at about 10 weeks compared to the typical 4 to 6 weeks. He cut iPhone sales estimates in the September quarter to 27 million from 30 million. The December quarter iPhone unit estimate went from 50 million to 45 million.

Analysts are starting to fret iPhone sales because Apple's new device, an iPhone 5s or iPhone 6, won't land until the December quarter or late in the second quarter. Misek noted:

We had recently noted that smartphone inventory levels at retail and carriers were elevated but were unsure which OEMs were most exposed. Our survey of several hundred Orange, Vodafone, and EE stores in the U.K. indicates that inventories are elevated for iPhones and the Samsung Galaxy 3. On the supply chain side, Jabil reported a weak quarter for its Apple-exposed segments and guided the main Apple segment flat Y/Y for the Aug Q. Our checks also indicate that Apple's wafer starts at Samsung's Austin fab have likely been cut and that memory module makers have recently been reallocating orders in Q3 away from Apple and toward emerging market players.

Meanwhile, Apple hasn't started assembling the latest iPhone, but is likely to trial soon an iPhone 5s and a low-cost version of the device.

Add it up and Apple has a few tricky supply chain items to navigate. First, most smartphone buyers know a new iPhone is coming and won't buy an iPhone 5. Apple needs to generate sales of the iPhone 5 and keep inventory levels solid as it ramps production of its latest device. The biggest wild card may be overall smartphone fatigue. Misek noted the Samsung Galaxy S3 is struggling. The sales windows for new devices are getting smaller and the risk of being stuck with inventory appears to be rising.

iphonejefferies

 

Misek surveyed several hundred Orange, Vodafone and EE stores in the UK and found that retailers:

  • Had more than five iPhone 5 16GB units 73.8 percent of the time.
  • The 32GB iPhone 5 was out of stock 43.3 percent of the time. All retailers had plenty of iPhone 4S and 4 devices available.
  • Retailers with the Samsung Galaxy S3 had plenty in stock, but few buyers. The Galaxy S4 was out of stock more than 95 percent of the time.
  • For comparison, the HTC One was also in stock more than 98 percent of the time and Nokia's Lumia 920 was out of stock 84.3 percent of the time.

Topics: Apple, iPhone, Mobility, Smartphones

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24 comments
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  • Please delete Shuman AD/Post

    Please monitor the board and delete idiotic ads. They demean your site.
    larsonjs
    • SPAM/SHAM

      Shuman is spamming all the topics with the sham web site.
      I doubt that ZDNet has any 'real" moderators.
      Automated process, does not even look at the "flag" count.
      Just a table of "forbidden" words.
      radu.m
      • Well, guess you were wrong!

        A moderator did indeed find that spam post!
        Wizard57M
        ZDNet Moderator
        wizard57m-cnet
        • Re: A moderator did indeed find that spam post!

          We need a system for flagging spam/abusive/inappropriate postings, don't you think?
          ldo17
  • Apple seems to be tripping over themselves

    I'm no Apple Fan, but they're lack of response to growing competition seems amazing. 5 Sales are dropping as one would expect, yet Apple seems to have a ho hum attitude about getting new product out to the marketplace. This "seems" like utter arrogance, but perhaps they are paralyzed with indecision. The 5 looks very dated and with no software upgrade until the fall and no new hardware on the market, they seem content to fall further behind.
    larsonjs
    • Please show evidence…

      Lack of sales? They sales on all product lines increase every quarter. Please don't confuse made up market share numbers with real data.

      Since your base assumption is wrong, there rest of your comment is irrelevant.
      JScottA44
    • Apple seems to be tripping over themselves

      What do you expect them to do? They will release the new phone when it is ready. Until then, sales of the iPhone 5 will slow, just as sales of the Galaxy S3 slowed before the S4 came out. That's the way this industry works. Apple doesn't flood the market with a dozen models of its merchandise as some manufacturers do, and it has worked well for them, and will continue to do so.
      rphunter1242
  • Not usually an issue

    Maybe a lower-priced iPhone is relevant, but most prognosticators claim that's a different product for more price-sensitive markets, and may not even show up in the USA or Europe. Regardless, Apple's less sensitive than most over excess inventory, simply because, if they stick to their game plan, the iPhone 5 doesn't vanish, is just moves over to become their tier 2 phone, bumping the 4S into the entry level position and the iPhone 4 into smartphone heaven.

    Watching iPhone 4 inventories should tell you more about what Apple's actually planning than iPhone 5 supplies. The building of the iPhone 5 is probably reactionary -- Apple's sales always tank in the months leading up to when "everyone knows" a new iPhone model is coming out. They may slow the iPhone 5, but then again, if it does become the $100 phone in October or so, sales will jump again. The iPhone 4, on the other hand, is likely to be gone, gone, gone... and they certainly wouldn't want extra stock of that lying around.
    Hazydave
    • Sounds about right

      Sales take a dip right before the next model refresh.

      As for the low cost iphone model, perhaps. It could just as likely be the expected 5S model and a new iPhone with a 5 inch screen to compete against phones like the S4/Note. Apple loves to compete at the high end and currently don't have anything competing in that space.
      Emacho
    • it is a $100 phone now

      I see sales everywhere - even ads on TV offering the phone for $100.
      marque2
  • Good that someone reminds Apple to keep an eye on the inventory ...

    ... as they have no-one actually donig that. I think they should put someone at the top who knows a thing or two about supply chain management ...

    /sacasm
    financegozu
    • Hee hee

      That's pretty good. A little too cerebral for today's troll.

      Gosh, you might have to explain your comment to them. Make sure you use small
      Misspelled words now.
      hammeroftruth
  • Apple finally haveing to deal with the "Osborne Effect?"

    For years, Apple has been immune to the effect of rumors of a new model shutting down sales of current models. iPads continue to appear immune. MBA as well. Seems the iPhone is the first product that is showing signs of a lagging fan base that cannot keep the sales engine in full gear knowing that there is a new product in the wings. I would guess it does not help matters that the competition is now leading the market with Apple having to play "catch-up". Apple really needs something new and completely different; a tall order to be sure.
    mryanaz
    • Making things up

      If you are just going to make up facts to support your bias, please save everyone the time an just don't post.
      "For years, Apple has been immune to the effect of rumors of a new model shutting down sales of current models."
      Bull. This is a well-known phenomenon, was commented on by the author, and several posters here already. Has effected the iPhone, iPad, and Mac markets from day one (and yes, I mean the Mac 128k/Plus).
      Your conclusion that this indicates some new phenomenon, and bodes ill for Apple's future is baseless.

      "iPads continue to appear immune. MBA as well. "
      Again, you are simply making up facts to fit your bias. In fact, it was a WIDELY reported story when iPad 1 inventories spiked prior to the announcement of the iPad2, etc.. And yes, MBA as well.

      " I would guess it does not help matters that the competition is now leading the market with Apple having to play 'catch-up'."
      Yeah, you keep telling yourself that.
      .DeusExMachina.
      • The catch up part is True

        IPhone 5 has almost the functionality of a G3 (with a smaller lower resolution screen and only 2/3rds the CPU power)and yet costs the same as a G4.

        As the niftyness of smart phones wears off features are king and brand loyalty fades. This will probably be the last year Apple can keep the fanbois unless they catch up. Hopefully the 5S is a much improved product.
        marque2
        • Oh please!

          First, claiming the iPhone has less functionality than the GIII because it doesn't add useless fluff like eye tracking (yes, useless, beyond useless even) is absurd. As is the claim it only has 2/3 the CPU power. While only dual core, in many scenarios, the A6 can run circles around Samsung's quad core CPU. And since it is running iOS and not Android, it can use its CPU cycles for useful things, no constantly monitoring the UI, because the OS is so inefficient.

          Oh wait, you used the term "fanboi". Enough said. Fail.
          .DeusExMachina.
  • Please cite evidence

    A one time inventory spot check is not enough to back up your comments. Sales of every iPhone continue to be better each quarter so there is no evidence that even Android handsets are slowing down much less causing a drop in iPhone sales.

    And please define "leading the market". Apple has more profit than all of the rest of the mobile device makers combined. Sells more iPhones in each quarter than they did in the same quarter the previous year. Has 9 consecutive highest consumer satisfaction honors for mobile devices. Etc. Etc. Please cite your evidence.

    As with a previous poster, since your base assertion is wrong, your opinion on what Apple needs is irrelevant.
    JScottA44
    • Rubics cube

      Also once had all the profits in the market but eventually other game companies took over as well. Problem is there is a perception that apple is falling behind and thinks the fanbois will stick with them or doesn't care because iWatch or something similar will take over.

      Lots of Android users smirking at the Apple fanbois and histrionic posts like yours. Personally I hope Apple can catch up with the 5s.
      marque2
      • You appear to know nothing about Erno Rubik and his toy, either

        Can you please research before your fingers hit your keyboard?
        .DeusExMachina.
  • Look at the Chart Again

    Apple is not selling as many of the less profitable 16GB versions because everyone is buying more of the more profitable 32GB and 64GB versions. They are almost sold out!
    techrepublicsteve