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iPhone SE Sales are much better than expected; over sales down 25%


Apple’s new low-cost iPhone SE is selling better than expected, based on an analysis of shipping times, according to a new research note from TF Securities analyst Ming-Chi Kuo.

However, he still predicts that iPhone shipments in the quarter ending in June could decline 20% or 25% year-over-year because of reduced demand stemming from the Covid-19 coronavirus pandemic.

Apple warned in February that it would not meet its goals for sales in the March quarter because of reduced demand in China as well as production problems stemming from that country’s response to Covid-19. However, Apple’s warning was made before the pandemic spread globally, and before parts of the United States, including Apple’s headquarters in California, started locking down.

Last week, Apple released a new iPhone in the midst of the crisis -- the first iPhone it launched without a major launch event. The iPhone SE uses a classic iPhone design that was first introduced in 2014, updated with modern chips and cameras. It’s the lowest-priced phone in Apple’s current lineup, starting at $399 in the United States.

Kuo argues that the strong reception for the iPhone SE suggests consumers are gravitating to lower-priced phones, which has implications for Apple’s business and the companies that supply it with parts.

“The most difficult challenge from COVID-19 for smartphone brands is the negative impact on consumer confidence or purchasing power after the pandemic outbreak, resulting in consumers preferring to choose lower price/spec models or to stop purchasing smartphones,” Kuo wrote.

Ultimately, Kuo is not optimistic about iPhone sales in the June quarter, as countries around the world have gone on lockdown to slow the spread of Covid-19, hurting consumer confidence and demand.

“We cut 2Q20 iPhone shipment estimation by 30% to 35–37 million units due to negative impacts from COVID-19. But it may have further downside risk,” Kuo wrote.

Kuo argues investors in Apple and its supply chain should focus more on the effects Covid-19 is having on consumer demand, not Apple’s ability to launch new products. He writes that Apple has done much of its essential design and verification work by deferring to partners in Asian factories, and that there’s a “likelihood” that new iPhone models will go into mass production in September and October, depending on how complex their designs are and if they support millimeter wave 5G service.

Apple has historically released new iPhones in September. Apple may also delay an iPhone model planned for spring 2021 to the fall, Kuo added.

Kuo regularly publishes research about Apple centered around its suppliers, and he has accurately described Apple products in the past before they were announced.

Original article can be found at https://www.cnbc.com/2020/04/21/kuo-iphone-se-sales-better-than-expected-but-iphone-shipments-down.html

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