iPhone Plans Say 20 Million Below Consensus Estimates

Apple’s 2022 iPhone production targets are about 220 million units, about 20 million less than analyst consensus estimates. It will also mean zero growth in 2021.

The Cupertino-based company is facing a number of hurdles ahead of its iPhone launch this year…

Background

Despite the problems of the past two years, Apple continued to set new revenue records – until the first quarter of this year. iPhone revenue rose 5.5% year on year and analysts expected the iPhone 14 to drive further growth.

However, the challenges Apple still faces are significant. First, the global shortage of chips.

The shortage was caused by a combination of factors. These include increased demand for technology during the pandemic, COVID-related production disruptions, and growing demand for chips from automakers; as cars rely on an increasing number of microprocessor units.

The biggest problem isn’t with CPUs and GPUs, but with much more mundane chips like display drivers and power management systems. These relatively low-tech chips are used in a huge number of devices, including Apple.

Second, massive production disruptions in China due to city-wide lockdowns as the country continues to insist it can eradicate COVID-19 despite growing public disillusionment. Pre-production of the iPhone 14 is reportedly already three weeks behind schedule, with the iPhone 14 Max standing out.

Finally, rapidly rising inflation — partly due to the Great Retirement and partly due to the global impact of the Russian invasion of Ukraine — is reducing disposable income, meaning less money can be spent on new gadgets.

Impact on iPhone production plans

Bloomberg reports that Apple has told its suppliers to expect orders for about 220 million iPhones this year, instead of the 240 million expected by analysts.

The company is asking suppliers to assemble about 220 million iPhones, about the same as last year, according to people familiar with its forecasts, who asked not to be identified as they are not public. Market forecasts approached 240 million units, driven by an expected major iPhone update in the fall. […]

The Cupertino, California-based company declined to comment on the outlook, which could change depending on the economy and supply constraints in the coming months. Apple does not disclose its production targets and has stopped disclosing the number of iPhones sold in 2019. Its shares fell about 1% in premarket trading on Thursday. […]

Even though the Chinese lockdown could hit Apple hard this quarter, the company is looking to manage the turbulence, one source said. Foxconn Technology Group, Apple’s primary iPhone maker, was able to keep most of the facilities running. This includes the largest group of factories in the central Chinese city of Zhengzhou.

However, some analysts remain optimistic.

This year will be a story of two halves,” said Linda Sui, senior director at Strategy Analytics, last month. “Geopolitical issues, component shortages, price inflation, exchange rate volatility and Covid disruptions will continue to affect the smartphone market in the first half of 2022 before improving in the second half.”

Apple has previously warned that its current-quarter revenue could drop as much as $8 billion, but we’ll have to wait to hear its launch quarter expectations.

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