Whatās Going On Here?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?Thereās an old economistsā saying that runs, āWhen America sneezes, the world catches a cold.ā But that old chestnut seems to describe China pretty well these days. The countryās 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 Zhengzhouās Foxconn-operated iPhone hub is planning to make around 3% ā thatās around three million ā fewer iPhones than anticipated this year (tweet this). 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?
Appleās 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 iPhoneās 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 6ās 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. | 