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Today, the Nikkei reported that Apple would scale back iPhone 6S and 6S Plus production by 30% during the Mar-16 quarter. We note that this follows other negative announcements from suppliers like Dialog Semiconductor in early December. While these reports add a level of concern to March iPhones, we believe investors are appropriately pricing in the potential for a disappointing March. We note that the best read on overall iPhones is Apple’s December guide and the company has not missed a guide since changing its guidance methods almost three full years ago. We believe the December guide implies slight growth of iPhone y/y including CEO Tim Cook’s specific mention that iPhones would grow y/y. Overall, this data point, albeit old, lends us confidence that March may not be as bad as expected assuming that if iPhone demand is up slightly in December and the overall smartphone market is stable with a large upgrade base of existing iPhone users, we would expect narrower change in the December and March growth rates.
Some notable points from the data
-Apple activations market share was down 2% on last year, whereas Samsung was up 2%.
-iPad Pro sales were less than 1% of of iOS activations, so only 1 in 23 Pads sold was a Pro. This is much lower than I would have expected.
-Android Phablets still outsell Apple phablets by a factor of almost 5
iPhone 6s sales are down 30% becuase not only is there a slowdown from last year, but more people are buying the 6 and 6+ now at $100 lower price.
My observation here in the UK when doing Christmas shopping was how empty the Apple stores I passed generally were compared to previous years. In some, there seemed to be more red t-shirts of Apple employees than customers! The watch sections seemed to be particularly empty.
