over 1 year ago • 2 mins
According to news out on Monday, Apple will produce three million fewer iPhones than expected ahead of the crucial holiday season.
What does this mean?
There’s an old economists’ saying that runs, “When America sneezes, the world catches a cold.” But that old chestnut seems to describe China pretty well these days. The country’s battling an economic slowdown, a teetering property market, and a whole host of issues triggered by its on-again-off-again lockdowns right now. No surprise, then, that Zhengzhou’s Foxconn-operated iPhone hub is planning to make around 3% – that’s around three million – fewer iPhones than anticipated this year. And whatever the reason for that production cut, it won't calm the already jangling nerves of Big Tech investors who just struggled through a treacherous earnings season.
Why should I care?
Zooming in: Supply or demand?
Apple’s insisting that its lowered iPhone targets are all down to supply snarls and not demand, but not that long ago the firm was planning an increase in production. So sure, a 3% cut in one quarter is no big deal in isolation, but such a rapid change in tone from Apple will have investors wondering if weaker demand is, in fact, at play here.
The bigger picture: Supercycles.
The iPhone’s getting on these days, and its years of rampant, reliable annual growth are in the past. Instead, demand for the product tends to jump every few years as major technology changes: the iPhone 6’s bigger screen led to a pop in sales, as did the first 5G-enabled device, the iPhone 12. That’s natural enough for older products, but it does make predicting iPhone sales pretty hard: new features tend to be closely guarded secrets, after all. On top of that, Apple may well find it harder to create bigger and better product improvements within the already mature smartphone market. And if that does happen, those step-ups in sales might be less impressive too.
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