iPhone production plans said to be 20M down on consensus expectations

Apple’s iPhone production plans for 2022 are said to be around 220 million units – some 20M lower than the consensus estimates of analysts. It would also represent zero growth on 2021.

The Cupertino company is facing a perfect storm of obstacles in the run-up to the launch of this year’s iPhone lineup …

Background

Despite the challenges of the last couple of years, Apple has continued to set new earnings records – right up to the first quarter of this year. iPhone revenue was up 5.5% year-on-year, and analysts expected the iPhone 14 to drive continued growth.

However, the problems still facing Apple are significant. First, the global chip shortage.

The shortage was created by a mix of factors. These include increased demand for technology during the pandemic, COVID-related production disruption, and a growing demand for chips by car-makers; as cars rely on increasing numbers of microprocessor units.

The biggest issue is not with CPUs and GPUs, but far 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 ones.

Second, widespread production disruption in China due to city-scale lockdowns as the country continues to insist it can eradicate COVID-19 despite growing frustration on the part of the population. iPhone 14 production prep is already said to be three weeks behind schedule, with the iPhone 14 Max singled out.

Finally, rapidly growing inflation – due in part to “the Great Resignation” and in part to global effects of Russia’s invasion of Ukraine – is reducing disposable income, meaning less money to spend on new gadgets.

Impact on iPhone production plans

Bloomberg reports that Apple has told its suppliers to anticipate orders for around 220M iPhones this year, instead of the 240M widely expected by analysts.

The company is asking suppliers to assemble roughly 220 million iPhones, about the same as last year, according to people familiar with its projections, who asked not to be named as they’re not public. Market forecasts have hovered closer to 240 million units, driven by an expected major update to the iPhone 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 doesn’t disclose its production targets and stopped disclosing how many iPhones it sells in 2019. Its shares dropped about 1% in premarket trading on Thursday […]

Though the Chinese lockdowns are poised to take a major toll on Apple this quarter, the company expects to manage the turbulence, one of the people said. Foxconn Technology Group, Apple’s main iPhone manufacturer, has been able to keep most facilities running. That includes its largest groups of factories in the central Chinese city of Zhengzhou.

Some analysts maintain their optimism, however.

This year will be a tale of two halves,” Strategy Analytics senior director Linda Sui said in a note last month. “Geopolitical issues, component shortages, price inflation, exchange rate volatility, and Covid disruption will continue to weigh on the smartphone market during the first half of 2022, before the situation eases in the second half.”

Apple had previously warned that its revenue for the current quarter could be down by as much as $8B, but we’ll need to wait to hear its expectations for the launch quarter.