2015 might have been the year of “peak iPhone.”
More and more analysts are now agreeing that in 2016, iPhone sales will — for the first time ever — go into decline.
It’s a troubling prospect for Apple: more than two-thirds of its total revenues and profits come from sales of the smartphone. If the iPhone is going in reverse, it makes it significantly more difficult for Apple to continue to grow.
Some of the speculation is based on recent guidance from Dialog Semiconductor, which supplies chips for the iPhone. Apple drives 75% of Dialog’s revenue — and on Tuesday, it reduced Q4 guidance from $430 million (£286 million)-$460 (£306 million) to $390 million (£259 million)-$400 million (£260 million). This suggests Apple is lowering its orders — a potential indicator the iPhone is going into decline.
Here’s what analysts are expecting in the year ahead for Apple’s flagship product.
MORGAN STANLEY: On Monday, the financial services firm predicted that sales of the iPhone will drop by nearly 6% in Apple’s 2016 financial year (or 2.9% in the calendar year). Analyst Katy Huberty points to “higher prices in international markets (ex-China) and maturing smartphone penetration in developed markets [weighing] on upgrades and new user growth” as the reasons behind the drop.
STIFEL: On Tuesday, Stifel pointed directly at Dialog’s revised guidance as evidence of a decline. “The size of the Dialog miss leaves us to believe it is iPhone (vs. iPad) related, and based on the dollar content that Dialog would typically see, we believe investors could estimate as much as a 12 million unit shortfall,” it said.
BAIRD: A Tuesday research note says “the Baird semiconductor team recently suggested a 20% cut in procurement orders based on its supply chain conversations.” Q2 of FY2016 will be down year-on-year, it expects, although it cautions that “we always take supply chain comments with a hefty grain of salt.”
CREDIT SUISSE: On Wednesday, it said it is lowering its estimate for calendar year 2016 iPhone sales to 214 million — 8 million less than its earlier prediction, and even less than Morgan Stanley’s 224 million CY2016 prediction. It says its Asian research team is detecting “a deeper cut in December and March production volumes. The cuts seem to be driven by weak demand for the new iPhone 6s, as overall builds are now estimated to be below 75-80mn units for the December quarter and between 45-50mn units for the March quarter.”
PIPERJAFFRAY: PiperJaffray’s Gene Munster is more effusive about the iPhone. He argues that while “investor concern about iPhone growth has increased based on measurable cuts to analyst estimates,” along with Dialog’s guidance revision, this isn’t the end of the world. “The next few quarters appear less significant to the broader iPhone story and the more important question is whether the iPhone will grow during the iPhone 7 cycle.” His answer: Yes. “We remain confident in our 4% cycle growth for iPhone 7.”
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