Apple’s iPhone, the company’s most important product, has seen three straight quarters of sales declines on an annual basis.
Most analysts expect the iPhone to grow slightly year-over-year in the quarter ending in December, thanks to strong demand in the United States for the iPhone 7 Plus. But that doesn’t mean the iPhone’s skid is over.
KGI Securities analyst Ming-Chi Kuo is predicting that Apple will continue to see iPhone sales decline over the first half of next year.
“We forecast total shipment volume of iPhones will decline YoY [year-over-year] in 1H17 due to weak demand in China, slow shipment volume of 4.7″ iPhones in 1Q17, and the lack of a new iPhone SE in 2Q17,” he wrote in a note distributed to clients on Friday seen by Business Insider.
“We estimate 1Q17 iPhone shipment volume of 40-50mn units, lower than the 51.2mn units in 1Q16,” Kuo wrote. “We forecast total iPhone shipment volume will reach 35-40mn units and fall YoY in 2Q17, lower than the 40.4mn units in 2Q16.”
A hard bargain
Kuo also writes that he’s hearing that Apple is pushing its suppliers, iPhone component makers, to cut its prices.
So Apple looks to strengthen its profitability by leaning on its suppliers to give it better prices on parts like screen panels, RAM, and other internal components.
“We believe iPhone component makers have been facing significant pressure from Apple (US) to cut prices. The price reductions may begin in November or December 2016, likely dragging down bottom lines within the supply chain,” Kuo wrote.
One thing that will help Apple’s bottom line: it’s unlikely to launch a new low-cost iPhone SE in 2017, Kuo said.
Suppliers that can be easily replaced, like those that make the screen panels for iPhones, have weak bargaining power. The head of Sharp, a Foxconn subsidiary that provides screens for Apple, recently discussed the iPhone 8 in a public speech.
However, some suppliers, like Samsung, are in a stronger position, and may even raise their prices, says Kuo. TSMC is also unlikely to be affected by Apple’s pricing pressure.
Still, increased profitability only means so much when overall sales are dropping. Apple has to be hoping that its next iPhone is a stunner and sells well.
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