Analyst Jun Zhang with Rosenblatt Securities recently claimed in a research note, by way of Street Insider, that production of Apple's (AAPL 0.53%) iPhone X flagship smartphone now sits at 3 million units per week, or about 430,000 units per day, and could grow to 4 million units per week, or about 570,000 units per day, in December. Those production levels appear to jibe with similar claims from KGI Securities analyst Ming-Chi Kuo.
This level of production, Zhang reportedly said, means Apple and its contract manufacturers are ahead of schedule -- something that'll allow Apple to more quickly reach supply-to-demand balance for this phone.
Image source: Apple.
Perhaps the more interesting data point, though, was Zhang's claim of the ratio of iPhone X smartphones with 256 GB of storage sold versus those with just 64 GB of storage. He saus it's running about 2-to-1. That means that of the 15 million iPhone X phones Zhang believes Apple has sold so far, 10 million units were of the 256 GB variety and 5 million were of the cheaper 64 GB variety.
Here's what that means for Apple.
The average selling price boost
Whenever a potential iPhone customer picks an iPhone X over either the iPhone 8 or the iPhone 8 Plus, Apple enjoys some degree of average selling price growth. The iPhone 8 starts at $699 and tops out at $849, the iPhone 8 Plus starts at $799 and tops out at $949, and the iPhone X starts at $999 and goes to $1,149.
So even if many would-be iPhone 8 and 8 Plus buyers simply opted for the 64 GB iPhone X, Apple would enjoy revenue growth. Evidence seems to suggest that those buying the iPhone X would've, in previous years, bought the smaller iPhone 8, so even if the 64 GB iPhone X outpaced the 256 GB iPhone X, Apple could very well enjoy a huge boost in average revenue per unit.
Image source: Apple.
If it's true that most iPhone X buyers are going for the 256 GB version, then that'll only serve to amplify the iPhone average selling price story and, by extension, the iPhone revenue growth story.
Putting things into perspective
Zhang says he expects Apple to sell about 30 million iPhone X smartphones in the quarter that ends in December. If the 2-to-1 ratio of 256 GB iPhone X models to 64 GB iPhone X models pans out for the entire quarter, then Apple should sell about 20 million of the 256 GB versions and 10 million of the 64 GB versions.
The total revenue in this case would be approximately $33 billion.
If the ratio were to be more along the lines of 1-to-1, then total iPhone X revenue would be about $32.2 billion. And, finally, if the ratio were inverted, Apple's iPhone X revenue from sales of 30 million units would be $31.47 billion.
Mix shifts within the iPhone X lineup won't have a huge impact on Apple's financials, but the difference between the best-case and worst-case scenarios would amount to roughly $1.5 billion in revenue. Assuming a gross profit margin of 38%, the difference in operating income between the worst- and best-case scenarios could be in the ballpark of $570 million.
In fact, since the additional flash memory probably doesn't cost Apple anywhere near $150 to add, the 256 GB iPhone X models probably carry higher gross profit margin percentages than the 64 GB ones. That could, in turn, mean that a shift toward the 256 GB iPhone X over the 64 GB iPhone X models could juice profits even further.
