Analysts with BlueFin Research Partners (via Barron's) apparently have some bad news to share about the sales of Apple's (AAPL +0.11%) flagship smartphone, the iPhone X.
The analysts say that Apple has reduced its iPhone X production target for the first-half of 2018 by 6 million units -- a cut that comes after the company reportedly already cut production estimates last month.
Image source: Apple.
Here's BlueFin Research:
Our most recent field checks indicate that build forecasts were cut once again this weekend, with the reductions primarily coming from the iPhone X family. The iPhone X builds were reduced by 6M, and thus far over 75M have been deducted from the once lofty plans for the OLED device.
The analysts now apparently expect Apple to sell just 219 million iPhones during calendar year 2018 (note that this figure should include about three months' worth of next-generation iPhone shipments). What's particularly concerning, though, is that the 219 million iPhone forecast apparently "includes a fairly optimistic" view of how Apple's upcoming trio of iPhones will be received in the marketplace.
Let's take a look at what this means for Apple's business.
Apple needs growth beyond iPhone
It's starting to look as though the entire smartphone market is nearing a peak and Apple doesn't seem to be immune to overall industry dynamics. It didn't help Apple that the only truly exciting model in its current lineup starts at $999 -- well above the starting prices of previous models.
My guess is that Apple's upcoming trio of iPhones will be compelling enough to allow Apple's iPhone business to buck the continued stagnation of the smartphone market for a full product cycle. Over the long-term, though, Apple could find it harder to drive significant upgrade activity among the current iPhone installed base and share gains in the premium portion of the smartphone market could become increasingly difficult to come by.
The multi-year stagnation in Apple's iPhone unit shipments, coupled with the dimming long-term prospects for the smartphone market, has made one thing clear: Apple needs sustainable growth beyond iPhone.
The growth candidates
Apple's core products like Mac, iPad, and iPhone aren't great candidates for long-term growth at Apple since the overall personal computer, tablet, and smartphone markets, respectively, aren't really growing much, if at all.
Apple's long-term growth, then, will necessarily be fueled by new and/or growing product categories. Examples of potential growth drivers include the Apple Watch (a product category that's been growing at an impressive rate), audio products like AirPods and HomePod, and various services (e.g. Apple Music and App Store).
Image source: Apple.
Apple might also enter entirely new markets and launch new services that could further accelerate its growth.
In the near term, though, because Apple's iPhone is such a large part of Apple's overall business, it'll be hard for these other growth areas to -- even in aggregate -- serve to offset any weakness in the non-growth portions of the business.
Over the long-term, though, if the product categories that have been growing swiftly continue to enjoy robust growth and if Apple continues to introduce successful new product categories and services, Apple should be able to deliver reasonable revenue and profit growth even if the products that drive Apple's business today continue to stagnate.
