- Several analysts have suggested that demand for Apple‘s iPhones in China may be falling.
- Longbow researchers have used Baidu search trends to highlight this point.
- Last month, Apple said it would no longer disclose iPhone unit sales, leading analysts to suggest that Apple’s sales would start shrinking.
Much of Apple’s rise to become a $US1 trillion company was driven by intense demand in China. The middle kingdom has an exploding middle class, and the iPhone became a status symbol for the good life, driving high levels of demand for the premium product.
Now analysts are increasingly suggesting that demand in China may be slowing for good.
The latest data point is a new report from Longbow Research, which says its checks with Apple’s part suppliers indicate severe cuts to orders of the iPhone XR and the iPhone XS Max – 20% to 30% – though they’re partially offset by order increases for older models.
The Longbow report corroborates a Nikkei report from last week that said Foxconn had cut the number of production lines of the iPhone XR to 45 from 60 and a Citi report that downgraded chip stocks based on disappointing “iPhone XR unit sales.”
Goldman Sachs analysts last month wrote that consumer demand for iPhones in China seemed to be “rapidly slowing.”
There are often reports that Apple has slashed orders after an iPhone launch. Sometimes these reports end up as red herrings: Apple has tons of suppliers, including multiple vendors for each part, and it can move around its orders for a variety of reasons.
But another sign is weighing on Longbow’s analysts: Search trends in China show declining sustained consumer interest in new iPhones.
“Another point of concern is Baidu iPhone searches fell off a cliff for October, indicating potential risk of faltering China demand,” the analysts wrote, despite slightly increased search traffic for new iPhone models on Baidu in September.
Here are the charts:
Last month, Citi performed the same exercise with search results from Google, the dominant search engine in the United States. Its analysts concluded that “customers are getting less excited for each new generation of iPhone,” pointing to less innovation on an annual basis.
Last month, Apple gave a lukewarm forecast for its all-important holiday quarter and said it would stop disclosing unit sales for iPhones, iPads, and Macs, sending the company’s stock into a funk. Analysts on Apple’s quarterly earnings call pressed CEO Tim Cook on whether the reduced disclosures meant Apple expected iPhone unit sales to decrease.
“Our installed base is growing at double digit, and that’s probably a much more significant metric for us from an ecosystem point of view and the customer loyalty, et cetera,” Cook said.
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