Apple Inc. , which is suffering from a global supply crunch, is now facing a different problem: slowing demand.
People familiar with the matter said the company told its component suppliers that demand for the iPhone 13 lineup had weakened, suggesting that some consumers decided not to try to source the hard-to-find item.
Already, Apple has cut its iPhone 13 production target for this year by as much as 10 million units, down from the target of 90 million, due to a lack of parts, Bloomberg News reports. But the hope was to make up for much of that shortfall next year – when the show is expected to improve. The company is now informing its sellers that those requests may not be fulfilled, according to the people, who requested anonymity because discussions are private.
The company is still on track for a record holiday season, with analysts expecting sales to increase 6% to $117.9 billion in the last three months of the calendar year. But it won’t be the groundbreaking quarter that Apple – and Wall Street – originally envisioned. Shortages and delays in delivery have frustrated many consumers. And with inflation and the omicron variable bringing new concerns to pandemic-weary shoppers, they may be giving up some purchases.
That could mean skipping the iPhone 13 altogether and waiting for an upgrade next year, when its successor comes out. The current lineup, starting at $799 for the Standard model and $999 for the Pro model, is a modest update from the iPhone 12, which had an all-new design. Bigger changes are expected for the 2022 model, giving some shoppers reason to wait.
Apple, based in Cupertino, California, declined to comment.
The iPhone is Apple’s flagship product, accounting for about half of its $365.8 billion in revenue over the past fiscal year, and rolling out upgrades is a delicate dance. With the iPhone 13, Apple and wireless carriers launched aggressive discount programs to incentivize purchases. In some cases, owners of iPhone 12 or earlier models were able to purchase the iPhone 13 at little or no cost. While discount programs are still available, some offer much lower savings than when the new models first went on sale.
During Apple’s latest earnings call in October, CEO Tim Cook said demand for new products was “very strong” — driven by interest in the latest iPhones, iPads and other devices — and that the company was on track to achieve a record holiday quarter. Its sales were $111.4 billion in the same period last year.
He noted that supply constraints are the company’s biggest challenge. Cook predicted that the struggle to get enough components, especially chips, would cost Apple more than $6 billion in revenue during the holiday quarter.
The restrictions hurt Apple’s partners, too. Sales of the company’s main chip supplier, Taiwan Semiconductor Manufacturing Co., have plummeted. , recently, with October revenue down 12% from the previous month to NT$134.5 billion ($4.8 billion).
Last month, Hon Hai Precision Industry, Apple’s main iPhone assembler, expected its business to shrink this quarter from a year earlier — due to declines in consumer electronics and computing — as it continues to struggle with chip shortages. On October 24, IQE Plc saw its shares fall 24% after warning of slumping demand for smartphones, although the semiconductor company did not mention any specific customers.
There is now more pressure on shoppers’ pocketbooks. US consumer prices rose last month at the fastest annual pace since 1990. Soaring food, gas and housing prices have eroded purchasing power despite strong wage growth.
Meanwhile, it is not as difficult to get iPhone 13 as before. Apple shoppers in the US have been waiting about a month for delivery of the high-value Pro model. Wait times are now reduced to two weeks or less.
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