Blue iPhone XR
Sell-through for the iPhone XR “largely improved” during the “11.11 holiday,” a note to investors seen by AppleInsider reads, with the sales increase claimed by Rosenblatt to be due to many online retailers providing a discount of between 10 percent and 15 percent on the device.
The firm’s research claims that, after one month of unit sales, the iPhone XR has reached the same level as the iPhone XS Max, and has surpassed the iPhone XS after both devices had two months of sales in China. While the improvement is encouraging, analyst Jun Zhang writes of the possibility the iPhone XR production will see “downside risk” after the holiday season, with the belief current iPhone XR production is still above sell-through rates.
Despite the bright news for the iPhone XR, the investor note continues to advise of reduced production estimates, continuing a trend in notes released over the last month.
In an October 29 note where Rosenblatt highlighted initial sales of the iPhone XR was weak compared to initial iPhone XS and XS Max sales, the firm revised its production estimate for the new iPhone models from 90 to 95 million units down to 88 million units for the current quarter, while production for Q1 2019 was predicted to be around 36 to 37 million units.
Just over a week later on November 7, Rosenblatt advised it thought iPhone XR sales were “weaker than initially expected,” suggesting Apple could cut iPhone XR production by an extra 5 million units this quarter. In Wednesday’s note, the firm is again lowering its estimates for total iPhone production, down to 74 million units in total for the current quarter, and 39 million for the first quarter of 2019.
If the iPhone XR’s unit sales “slightly surpass” total unit sales for the iPhone XS and XS Max, currently speculated to be 18 million units this quarter, Rosenblatt believes Apple might need to only produce between 25 million and 28 million units in the current quarter.
“We believe Apple is targeting production of 32 million iPhone XR units in C4Q, which is why we believe the company might need to cut production again after the holiday season,” the note states.
If Apple cuts production after the holiday season, Rosenblatt believes this may “lead to stability within the Apple supply chain in the March quarter due to stabilizing iPhone XR sales.” Sell-through rates for the iPhone XS and XS Max will face “normal seasonality” during the first quarter of 2019, “while iPhone X sales might be relatively stable due to the late launch of the model.”
Shipment speculation for the cheapest option in Apple’s 2018 iPhone range has already caused some issues among investors, with some offloading Apple stock over analyst pessimism.
In China, Rosenblatt suggests Apple is facing increased competition from the local Huawei, which has seen high sales of the Mate 20 and has sold out of the Mate 20 Pro. Despite LG Display panel quality issues, it is estimated the Mate 20 Pro’s sales are a 20 to 25-percent year-on-year increase from the Mate 10.
“We believe may high-end consumers switched to Huawei’s smartphones over the last two years,” Zhang writes, “leading to the company taking share in China not only from Samsung, but Apple as well.”