With supply chain disruptions and the war in Ukraine, Apple is said to have cut iPhone orders for 2022, with another drop coming in the near future. That said, services are becoming a “key differentiator” for Apple’s gains.
Seeking Alpha is highlighting a couple of analyses about iPhone orders and services’ importance. Analyst John Donovan from Loop Capital said in a research note that iPhone builds have dropped another 9 million to 254 million. He is also cautious about additional cuts that are coming “in the not too distant future.”
Donovan believes Apple will cut its iPhone build orders to be between a range of 245 million and 250 million. For the iPhone SE, he says the orders have been cut by 20 million. Analyst Ming-Chi Kuo also recently corrected his prediction about the low-entry iPhone shipment from 25-30M to 15-20M.
“Citing several factors such as the Ukraine-Russia war, supply chain disruptions, and other usual rationale, digging deeper we are uncovering some additional insights,” Donovan wrote in a note to clients.
The analyst also comments on the “dismal” results of the mini iPhones saying Apple realized they have “limited appeal.”
“Despite this, clearly this lack of demand is surprising to AAPL and the pivot to more iPhone 13’s is underway,” Donovan explained, adding that it was a “savvy move” by Apple to use the same processor for the iPhone SE with 5G and iPhone 13.
While iPhone orders might struggle a bit in 2022, David Vogt, from the investment firm UBS, thinks services like Apple Music, Apple TV+, and iCloud are increasingly becoming a “key differentiator.”
According to Seeking Alpha, he surveyed more than 4,000 iPhone users from four different geographies and found that US-based upgrades and retention are still high, with the iPhone handset age around 2.3 years.
Other key findings from the survey include that Music, iCloud, Arcade and Fitness rates are higher (excluding China), while News is “flattish” and Apple TV+ looks to have plateaued.
Users with higher-end devices, such as the iPhone 12 and 13, also drive Apple services revenue. App Store spending has “moderated” a bit following “COVID-related strength” and Apple Pay adoption continues to increase.
It’s important to remember that by the beginning of April, Apple was removed from J.P. Morgan’s Analyst Focus list, with the firm citing “worries over consumer spending.”
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