Slowing demand for new iPhone puts damper on Apple’s outlook

Apple, suffering from a global supply crunch, is now confronting a different problem: slowing demand.

The company has told its component suppliers that demand for the iPhone 13 line-up has weakened, people familiar with the matter said, signalling that some consumers have decided against trying to get the hard-to-find item.

Already, Apple had cut its iPhone 13 production goal for this year by as many as 10-million units, down from a target of 90-million, because of a lack of parts, Bloomberg News reported. But the hope was to make up much of that shortfall in 2022, when supply is expected to improve.

The company is now informing its vendors that those orders may not materialise, according to sources who asked not to be identified because the discussions are private.

The company is still on track for a record holiday season, with analysts projecting a sales increase of 6% to $117.9bn in the final three months of the calendar year. But it won’t be the blockbuster quarter that Apple — and Wall Street — envisioned.

Shortages and delivery delays have frustrated many consumers. And with inflation and the Covid-19 Omicron variant bringing fresh concerns to pandemic-weary shoppers, they may forego some purchases.

That could mean skipping the iPhone 13 altogether and waiting to upgrade in 2022, when its successor comes out.

The current line-up, which starts at $799 for the standard model and $999 for the Pro, is considered a modest update from the iPhone 12, which had a whole new design. Bigger changes are expected for the 2022 model, giving some shoppers a reason to wait.

Apple declined to comment on the report.

Apple suppliers across Asia extended their declines after Bloomberg’s report. In South Korea, LG Innotek slid 11%, while Hong Kong-listed AAC Technologies Holdings fell as much as 4.8% and Japan’s TDK dropped as much as 4.8%.

The iPhone is Apple’s flagship product, accounting for about half of its $365.8bn in revenue during the last fiscal year.

Rolling out upgrades is a delicate dance. Apple and wireless carriers unleashed aggressive rebate programmes to spur purchases of the iPhone 13. In some cases, owners of an iPhone 12 or earlier models were able to buy an iPhone 13 at little to no cost. While discount programmes are still available, some offer less dramatic savings than when new models first went on sale.

During Apple’s last earnings call in October, CEO Tim Cook said that demand for new products is “very robust” and that the company is on track for a record holiday quarter. It had sales of $111.4bn a year earlier.

He pointed to supply constraints as the biggest challenge. Cook predicted that the struggle to get enough components, particularly chips, would cost Apple more than $6bn in revenue during the holiday quarter.

The constraints have hurt Apple partners as well. Sales for its main chip supplier, Taiwan Semiconductor Manufacturing, weakened recently, with October revenue falling 12% from the previous month to NT$134.5bn ($4.8bn).

In November, Apple ’ s main iPhone assembler, Hon Hai Precision Industry, predicted that its business would shrink this quarter from a year earlier as it continued to suffer from the chip shortage. On October 24, IQE’s shares fell 24% after it warned of softening smartphone demand, although it didn’t name any particular customer.

And there’s now more strain on shoppers’ wallets and purses. US consumer prices rose in November at the fastest annual pace since 1990. Surging costs for food, petrol and housing are eroding purchasing power despite stronger wage growth.

However, the iPhone 13 isn’t as hard to get as it once was. Apple shoppers in the US had been waiting about a month for the Pro model to be delivered. Now waiting times are down to two weeks or less.