Ming-Chi Kuo, of TF Securities, has once again slashed sales estimates of iPhone XR — due to reports of the new flagship product underperforming versus its expectations. Appleinsider reports that a possible trade war with China also factors into the decision.
“In a note to investors seen by AppleInsider Ming-Chi Kuo of TF Securities has advised investors that there are three factors that are holding down iPhone XR demand world-wide. The first, blanket, reason is the negative impact on consumer confidence that a possible trade war could have, particularly in the Chinese market… Also cited by Kuo is the possibility that customers are waiting for the iPhone XR feature set to become more affordable in another year with added feature boosts, like even smaller bezels and a dual-camera system in that pricing level. Competition from Huawei’s Mate 20 series is also cited, but in passing as a third factor.”
It is important to note that consumers have heard this type of speculation in the past, negative news hitting social media almost every year since the iPhone was first introduced. Some claim that there is a recognizable cycle wherein some speculation about disappointing iPhone sales comes out just before the holiday quarter. Investors get nervous, estimates are cut, and the stock price is slashed — according to the same critics. Record numbers are reported after the holiday season reaches its conclusion. Investors pick up more Apple stock at a reduced price. Rinse and repeat.
Jim Cramer of Mad Money has described this cycle many times. Kuo provides three reasons for a potential downturn in demand that deserve a little more scrutiny.
Looming Trade War with China
There is indeed a looming trade war with China, and there is little doubt that Apple will be adversely effected by it. But, there is no reason to believe, as yet, that consumers will base a major purchase decision on the political machinations of giant corporations and governments. When people are told that they can’t have a luxury item, they often want it more — not less.
There is nothing lackluster about the iPhone XR on a technical level. The wider public perception has been one of quality and great value. Almost every professional review of the iPhone XR has been lavish with praise. Few in the industry media seem to believe that the iPhone XR is lackluster in any way.
Competition from Huawei’s Mate 20 Series
No Apple watcher can take this one seriously. No matter how good the Mate 20 series is, no one comparison shops between the iPhone and a Huawei phone. Apple has never competed with Huawei, and is not at all effected by any midrange Android phone from China. The market demographics for these products are too different to draw serious competition between them.
Tim Cook has repeatedly admonished supply chain watchers like Kuo that Apple sales cannot be determined by their moves in the supply chain. Most expectations are that this will be yet another record quarter for iPhone sales — trade war, features, and midrange Android phones notwithstanding.