More Evidence Emerges of Soft iPhone Sales

Posted on November 12, 2018 by Paul Thurrott in iOS with 44 Comments

Another iPhone component supplier has warned of softer than expected demand for Apple’s latest handsets. Lumentum, which supplies FaceID components for the iPhone XS, XS Max, and XR, has reduced its profit and revenue forecasts thanks to reduced orders from Apple.

The news has sent Apple’s stock price tumbling again, this time by 4 percent, which has erased $40 billion from its market value.

This isn’t the first sign of bad news for the latest iPhones. As I wrote last week, a Nikkei report called demand for the iPhone XR “disappointing” and noted that Apple’s suppliers have canceled plans to ramp up production of the device.

But this Lumentum news is particularly damning because the firm had issued its original financial forecasts just two weeks ago. This means that Apple reduced its component orders since then, and that the situation is worse than previously understood.

And Lumentum isn’t alone. As Reuters reports today, many of Apple’s suppliers “have lowered numbers because of their unnamed ‘largest customer,’ which is Apple.”

Apple, of course, saw this coming. If you look at iPhone sales over time, you’ll see that “peak iPhone” happened in the first quarter of 2017. Since then, quarterly iPhone sales have dropped year-over-year. And this led Apple to announce 10 days ago that it will no longer report unit sales. And it is apparently about to get worse.

The question here is what kind of a shortfall to expect. Since Apple will no longer report unit sales, we’ll never know. But three analysts polled by Reuters said they expect an iPhone sales reduction of 18 million to 20 million units compared to original estimates.

Don’t feel bad for the Cupertino consumer electronics giant. It has raised prices across the board and is aggressively pursuing its services businesses in order to make more money from each of its existing customers. I call this new strategy Apple Jacked. And if successful, Apple could actually continue growing financially for many quarters to come.


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Comments (45)

45 responses to “More Evidence Emerges of Soft iPhone Sales”

  1. jaredthegeek

    Its almost as if people are unwilling to spend $1200 for a phone.

  2. briantlewis

    Every year with the component supplier reports. Every. Year.

    And they're wrong. Every. Year.

    • Chris_Kez

      In reply to briantlewis:

      It does seem like we get a handful of these reports every year but unit sales just keep chugging along. For many of these component suppliers Apple is their best, largest customer. Apple is in a position to play suppliers off of each other, to manipulate supply and demand by buying up components, to extract favorable price adjustments, etc. Putting together supply chain reports is like the blind men with the elephant-- it is possible to have individual reports be true but still misrepresent the whole story.

      It is also true that analysts of various stripes like to spin stories that can move the markets just enough to trigger stock runs that they then profit off of.

      We'll know the real story in a few months. Apple may not release the unit sales but there will be plenty of research firms and long-time Apple watchers who will be able to put the pieces together and land on a fairly narrow band of likely sales numbers based on myriad sources of hard sales data.

  3. Nyghtfall

    Four years ago, I bought me and my wife's first smartphones - the HTC One (M8). Having grown up in the 70s, I hated spending so much money on a phone so we agreed to never upgrade until necessary. Two weeks ago, we finally pulled the trigger and decided to give iOS a whirl with the iPhone XS. Three days later, we both concluded we HATE iOS and the iPhone, so I returned them and bought the Samsung Galaxy Note 9. Suffice it to say, we... could not... be happier.

    • William Clark

      In reply to Nyghtfall:

      That's the great thing about choice. There's something for everyone. I've had iPhones and Android phones and Windows phones. And I keep coming back to iPhone because it does what I need it to do. Android has some nice features but many of the apps didn't feel as polished as the iPhone and I hated that when you buy an Android phone you may or may not get updates. Plus some Android phones have terrible bloatware.

      That said, I think Apple missed the mark on pricing on the new phones. When people are buying laptops for $500-600 it's hard for them to justify $1000-1200 for a phone, even an iPhone. I'm sitting out this round of upgrades and instead had a new battery put into my 6s+ and it's like new again.

      • cuppettcj

        In reply to waclark57:

        Saying that Android apps are not as polished as iOS apps is a fair complaint. However, I feel the level of customization you have over your phone is so much greater on Android than with iOS. Also, I love the fact that if Samsung gets too greedy on pricing the way Apple is doing now, then I can switch to many different flagship brands and take my apps with me.

        With Apple you are very limited. Can't afford to pay double for their next iPhone flagship? Well then I guess you need to either wait it out (as you did), take a step down and get one of their lesser models, or otherwise start all over with your app collection on Android. This is not a trap I would like to find myself in.

        • William Clark

          In reply to waclark57:

          Oh I complete agree that Android is infinitely more customizable than iOS. I found some of the customization to be useful but some of it was sort of interesting for a minute but didn't really make the phone any better (or worse).

          Apple has people more "locked-in" to be sure. But some of the Android flagship phones are not priced all that much less than the new iPhones. A Galaxy Note 9 is close to $1000, Google Pixel 3 is $900.

          The good news for me is I don't have to make a decision right now. I just put a new battery in my 6s+ and it's working great.

    • robincapper

      In reply to Nyghtfall:

      Nice, Note 9 probably my current favourite due to big battery, headphone jack and pen. But happy with 7 Edge, running mostly Microsoft Apps, until it needs replacing. Sadness is the Nokia Z launcher I LOVE is no longer available in the store, but will live on until the phone dies or needs a refresh.

  4. dontbe evil


  5. glenn8878

    Apple is segmenting the iPhone price points and specs in bizarre ways. I like the XR, but disappointed with the specs. I wish it had same equipment as the iPhone 8 Plus like 2 cameras and 401 ppi resolution.  If I really want to pay less, I might just go with the iPhone 8 Plus with all the sacrifices I'm making with the XR.

  6. Patrick3D

    With regards to smartphones, price has never been a concern to me since I always go with the 2-year payment plan. That makes the price completely painless. It's the phone itself that has pushed me away, hidden gestures, increasingly larger screens, FaceID and so on. Apple simply no longer makes a device that meets my needs. The switch to Android is still rough but it is helping me learn what I really care about the most in a phone.

  7. red.radar

    Tech sector as a whole is slumping. The companies doing well are the ones with a balanced portfolio of services to offer.

    Smartphones have not improved substantially in feature set in quite some time. The developments have been incremental.

    Tech devices are commodity items. Sure some have tried to give the impression of quality through slick design.... but the quality issues reported can’t be hidden behind glitz and glam.

    Just buy what works and get on with it.. iPhone ... android ... it doesn’t matter it all connects to the same services anyways. Electronic devices are now the pipes that deliever customers to services.

    I have an iPhone 8 and plan to keep it for a very long time. Apple needs to convince me with a new killer feature for me to upgrade.... and it’s not Face ID.

  8. Xatom

    Bottom line is cell phones have ceased to deliver incremental value sufficient to justify the nosebleed pricing at this point in the cycle. As the old saying goes, a fool and his money are soon parted which applies to anyone on less than a 3 or more year upgrade cycle at this point no matter what hypnotic tricks one may use to rationalize squandering 1000+$.

  9. locust infested orchard inc

    Quote by Paul Thurrott, "Lumentum news is particularly damning because the firm had issued its original financial forecasts just two weeks ago. This means that Apple reduced its component orders since then, and that the situation is worse than previously understood."

    I Lament(um) for Apple at the $40 billion wiped from its market value on Monday.

  10. nbplopes

    This is more a reflection of Apple extremely unfriendly pricing models to the consumer and prosumer of late, rather than market saturation.

    Having said this, we will see how profits go. But having iPhones priced doubled than they use to, will probably help in that department. Even if sales are down by half :)

    Mind you the thing of hiding unit sales is that we loose one of the most important indicators of how much people actually value iPhones. It’ will be just about profit ... that never is a direct indication of value by itself where mankind is concerned. Check what happens in art galleries for instance.

    Yes, increasing prices can increase profits. That Is one way. Another way is coming up with breakthrough innovation. That is how they did it before. I was hoping that would be the case of iPad Pro, but the pricing does not seam to be inline for rapid growth up to replace more traditional approaches while creating new business lanes. The strategy looks pretty much contrived in that sector.

  11. chandra sekhar

    Nice Article. Informative.

  12. randallcorn

    People used to think you went to ATT and got your phone for $200. Did not understand subsidizing. Actually ATT never said anything about it. They charged you monthly for the phone and never lowered the price after if was paid for. That is not subsidizing that is stealing. Now that ATT actually shows you what you are paying for the phone and what you pay per month for it I think some are realizing maybe they don't need to upgrade every year!

  13. rejohnson

    Used to be supply and demand were the rules, now it's price and demand as there is a never ending supply. Lower the price and demand jumps. Not rocket surgery...

  14. bart

    Would be nice to see the consumer forcing lower iPhone prices. If that would ever happen of course. I know....

    • colin79666

      In reply to Bart:

      It would but actually the XR isn’t too bad price wise compared to the launch price of the 6s or 7 that people might be looking to upgrade from.

      For me (with a launch week 7) it is Face ID that means I’ll not be buying another iPhone until Apple add Touch ID back in. Even a £100 price drop would not tempt me to put up with something which is less reliable and requires more actions than the thing it is supposed to replace.

    • jbuccola

      In reply to Bart:

      The secondary market serves this need extremely well. iPhones stay in market a ~year longer than their Android counterparts, thanks largely to the virtuous cycle of Apple upgrades and resale appeal. It's a huge reason Apple put performance improvements for older phones into iOS12 -- they get it....

  15. CaedenV

    This is the same problem all over the tech industry. PC sales have slumped the last few years, not because people don't use PCs, but because everyone who needs one has one, and a 5+ year old desktop or laptop is typically 'good enough' even for moderately demanding use cases.

    Phones too are 'good enough', and you simply don't have to upgrade every 2 years to have a functional device any longer, and that is reflected across the board, not just iPhone sales.

    As devices last longer, they become more long-term premium 'investments'. Fewer units sold, and prices rise to make up the difference. We have already seen this in the PC industry where $1000 5 years ago gets you roughly the same performance today (granted with better GPU performance), but the difference being that if you need more power it is now available where it wasnt before (just at ever higher price thresholds).

    When you need a device, it makes the price more justifyable knowing that it will last longer (provided you don't have butter fingers). But on the other hand, until you really need a new device, it makes upgrading a working device rather difficult.

    • skane2600

      In reply to CaedenV:

      People jumped to the conclusion that the slump in PC sales meant that they were being abandoned in favor of smartphones, but the slump in smartphone sales suggest otherwise (unless we should now declare a post-smartphone era too). The smartphone market is reaching maturity, it's just doing it faster than the PC market did.

    • warren

      In reply to CaedenV:

      The idea that the $1,000 laptop of 2013 is "roughly the same performance" of today's laptop is absolutely not true. Who told you that? Don't listen to them.

      Let's compare the entry-level 2013 IdeaPad Yoga 13 to a $999 2018 Yoga 730 13" as a random example..... it's really no contest:

      2013 / 2018

      i7-3537U / i5-8550U .... 40% more per-core speed and twice as many cores. Lower TDP, too.

      4 GB RAM / 8 GB RAM .... 2x the RAM

      Intel HD 4000 / UHD 620 .... 2x the performance

      1600x900 / 1920x1080 .... 1.5x the pixels

      500 GB 5400RPM HDD / 512 GB PCIe SSD .... I mean, come on now

      Reviewers have found the 2018 model gets about 2x the battery life, too.

      • William Clark

        In reply to warren:

        But for a lot of people that increase in performance is lost. If you're just reading email, surfing the web, using Facebook and so on you likely won't see any real performance gains.

        • locust infested orchard inc

          In reply to waclark57:

          For the people you refer to, suggest to them an iFad is most appropriate for their usage, and they shall forever be indebted to you.

          Anyone who uses Fakebook is not deserving of the sophistication and performance of a PC.

        • sbrown23

          In reply to waclark57:

          Wait, what?

          The OP: "We have already seen this in the PC industry where $1000 5 years ago gets you roughly the same performance today (granted with better GPU performance)"

          Warren countered (correctly) that performance has actually increased significantly.

          And your reply is, "but a lot of people don't see that increase"?? If grandma is just reading email, websites, and using Facebook, she's probably not using a $1000 laptop. Hell, a $500 laptop has most of the gains listed by Warren, just not as thin and probably not a 2-in-1 form factor. And yes, she will see the per-core performance gains, especially in website page loads with a lot of javascript (i.e. Facebook). The increased RAM will help when she forgets to close a bunch of tabs. The improved pixel density will help her read her Facebook and emails. Improved graphics won't matter since grandma doesn't game, but it will help for page rendering and hardware support for h.264 videos of the grandkids, etc.

          Is grandma stressing her computer? No. She's not gonna be pegging all four cores of an 8th gen Core i3. Is she in fact able to use many of the performance gains in her daily use? Yes.

          • William Clark

            In reply to sbrown23:

            $500 or $1000 doesn't really matter, yes the machines of today are faster, no argument there. But I still believe that for many of the more mundane tasks like email, Facebook or looking at pictures people generally don't notice some of the performance gains.

      • digiguy

        In reply to warren:

        Warren, that's a very simplistic view to say the least... The big leap in performance came only last year with quad core, until 2017 the difference was quite small. My sandy brydge Asus i7 ultrabook from 7 years ago is almost as powerful as my 2017 Samsung notebook 9 (Geekbench 6000 vs 8500), has an SSD and 8GB ram... (bought for 1300$ back then, only slighty more than the Samsung). Now of course if you choose a crappy laptop or a terrible value from back then and compare it to a high end or good value from now... and I can give you several other examples that prove your bias...

        Anyway a good laptop from 7 years ago is perfectly capable today and will probably be good enough for at least 3 to 5 years to come for most people, including most business people. Also those computers, contrary to current ones, can be upgraded in disk and RAM (up to 16GB each). From Sandy brydge on, changes to performance have not been dramatic, except for the move to quad core... 7 years earlier (2004-2005) instead, laptops had pentiums 4 and were many times slower than Sandy brydge.

        What has changed over the last 7 years is that now we tend to have higher resolutions, IPS screens (my old x220 has an ips screen by the way) and be lighter and/or have long battery life (again my 1.4 KG x220 was not heavy and my 1.7 kg asus had over 7h of battery life back then with its 84wh battery).

        • sbrown23

          In reply to digiguy:

          So a 40% or so improvement (Geekbench 6000 vs 8500) in performance is quite small? Granted, we aren't seeing the massive leaps in per-core CPU perf in every generation that we saw in the 90's and 2000's. It's becoming ever more difficult to continue to shrink transistor size, increase clock speed, and overall CPU perf. We are not going to see the same massive performance shift from before. The low hanging fruit has already been picked. Hence, the architecture and process optimizations leading to the 10% or so per year improvements. It's the CPU + platform improvements that make the difference now.

          Sure a laptop from 7 years ago is still usable today, if you spend the money to bring it a little more current (i.e. memory, HDD-to-SSD upgrades, and battery replacement). However, the implication that systems can't be upgraded now is just wrong. Sure, MacBooks and the ultra-thin and light PCs can't, largely due to form factor and Apple tax. However, there are still plenty on the market that can be upgraded.

          "What has changed over the last 7 years is that now we tend to have higher resolutions, IPS screens (my old x220 has an ips screen by the way) and be lighter and/or have long battery life"

          No, what's changed over the last 7 years is both those things, and the increased performance warren talked about. Are you going to completely ignore the effect of SSDs on system performance? The increased RAM? The improved iGPU capabilities for hardware rendering of videos and even basic gaming in some cases (at lowest settings)? The massively improved I/O (i.e. USB 3.1 Gen 2, TB3) making high end external storage and eGPUs feasible?

          I'm not sure why you are insistent that today's systems are not improved over older systems. It's the CPU + platform improvements that make the difference now.

    • William Clark

      In reply to CaedenV:

      I think there are a couple of things at work here. First, most cellular companies stopped subsidizing phones. So now if you want the new phone you're going to shell out over $1000 (or make monthly payments). Before you only had to agree to a 2 year contract.

      Second, for the price increase there wasn't enough "new" to justify the spend on a new phone. And the XR, which looked attractive at a lower price point forces people like me to downgrade on some specs, like lower screen resolution, lower pixel density and no touch id or 3D touch.

      • cuppettcj

        In reply to waclark57:

        Did the cell phone companies ever really subsidize the phones? Whenever I did price comparisons between big network plans with "subsidized" phones and MVNOs with bring your own device plans, I realized quickly that the consumer was paying full price for the phone regardless of the option they chose.

        • William Clark

          In reply to cuppettcj:

          Well, as I recall, yeah you had the phone for at least 24 months and if you factored in the cost of the plan it wasn't significantly cheaper, if at all. But now you have to pay for the phone up front or carry the cost over some number of months and still have to pay the price for the service.

          I don't have a problem with the new way of doing things but I think for some people it might be difficult to justify.

  16. scotttech1

    Forbes Headline tomorrow

    Paul Thurrott reports "Apple selling Soft iPhones"

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