iPhone production delays delay planned iPhone production delays, iPhone is the only bright spot on the smartphone landscape, and analysts react to last week’s Apple earnings.
iPhone Production Delays Delay Planned iPhone Production Delays
An apparent slowdown in iPhone production will delay a planned slowdown in iPhone production — that seems to be the word from TF International analyst Ming-Chi Kuo.
You remember that “small COVID outbreak” we talked about last week at Foxconn’s “iPhone City” plant in Zhengzhou, China? The one that started with Foxconn asking people to take their meals in their dorms and wear N95 masks when out of their dorms? The one that graduated to a Foxconn spokesperson saying that work in the facility was “relatively stable with health and safety measures for employees being maintained”?
You know, I’m starting to think this COVID-19 thing isn’t going away. And that “relatively stable” may be a relative term.
In a series of Twitter posts, Ming-Chi Kuo said that the plan had been to reduce iPhone production over November and December. But, the COVID outbreak has put the Zhengzhou plant in “closed-loop production” mode. Virtuous as the “closed-loop” might sound, it takes a toll on production. Slows it. According to one of the analyst’s posts:
More than 10% of global iPhone production capacity is currently affected as Foxconn’s Zhengzhou iPhone plants suddenly entered closed-loop production without warning.
So, Foxconn had planned to slow production, but now they can’t because production has slowed. Seeming to send a mixed message, in one single Twitter post the analyst indicates that the current iPhone shipment forecast has not changed, and that “there should be a limited impact on the 4Q22 iPhone shipments.” The analyst also says that Apple is talking with Pegatron and Luxshare about moving some of their lines from producing units on the consumer end of the iPhone 14 line, to cranking out Pro and Pro max units.
I’m Out!
Possibly adding to iPhone production problems: Workers who’ve had enough of lockdowns and are literally (apparently) jumping the fence. The BBC (via Yahoo! News) ran a report Sunday saying that some employees at Foxconn’s Zhengzhou plant had been seen jumping fences and hoofing it home. Quoting the report:
One 22-year-old worker […] told the Financial Times it was “total chaos in the dormitories” he and colleagues were being kept in. “We jumped a plastic fence and a metal fence to get out of the campus,” he added.
Workers also claimed the area surrounding the plant had been locked down for days, with Covid-positive workers being subjected to daily testing and quarantines to try to contain the outbreak.
Perhaps trying to stave off more unrest (and keep the iPhones flowing), the BBC piece indicates that Foxconn is working with authorities to give workers an easier time of it. In a statement Sunday Foxconn said, “The government agreed to resume dine-in meals to improve the convenience and satisfaction of employees’ lives…” According to the report, Foxconn also said it was working with authorities on “point-to-point” transportation to get workers who want to go home back home in an orderly way.
Having a “relatively stable” day. You?
Counterpoint: iPhone Only Bright Spot for Global Smartphones Last Quarter
That Apple is having trouble meeting demand on its Pro phones kind of reads as good news considering the cliff over which smartphones have gone globally. Counterpoint Research hit with numbers on Friday that marked last quarter as the lowest September-quarter for smartphones since 2014. According to the firm, “political and economic instability drove negative consumer sentiment,” though the smartphone market saw two notable exceptions: Apple and Samsung, kind of. Apple is a definite, having grown shipments 2% year-on-year and pushing its marketshare to 16%. On the kind of side, Samsung’s shipments were actually down 8% year-on-year, though they did grow shipments 5% from the June-quarter to the September-quarter.
Counterpoint lists lots of factors holding the smartphone market down. Those include the war in Ukraine, tensions between the US and China, global currencies weakening against the dollar, inflation, and fear of recession. The firm thinks all of that may be strangling sales of low and mid-range smartphones. It’s also probably got people holding onto the phones they already have, “adding to a slow but sustained lengthening of smartphone replacement cycles…”
The one bit of good news in any of it seems to be iPhone. Counterpoint Associate Director Jan Stryjak thinks the first full-quarter of iPhone 14 availability will add “further quarterly improvement” for the December-quarter. It also sounds like he’s looking for bargains from other phone-makers as they “focus on getting rid of excess inventory in Q4…”
Canalys: iPhone Only Bright Spot for Smartphones in China Last Quarter
Canalys has had a look at smartphone sales in China last quarter. In a word — weak… iPhone not included. According to the firm, third-quarter shipments fell 11% for the September-quarter versus the same quarter a year earlier. By the firm’s reckoning, vivo was down 23%, OPPO was down 27%, Honor was down 16%, Xiaomi was down 17%, and Apple… Apple shipments were up 36% last quarter. Even that was only mostly good news, though. Canalys Analyst Amber Liu was quoted in the firm’s press release, saying:
Apple saw remarkable growth in Mainland China in Q3… Its annual launch is highly anticipated by consumers and channels and strong demand for the iPhone 14 Pro series contributed to Apple’s overall performance. However, lackluster demand of the iPhone 14 series sent a strong signal that even Apple is not completely isolated from weak Mainland China consumer demand. Under an onslaught of Android vendor competition, Apple had to concede to adopt aggressive promotions of its entry-level editions and previous generation devices, especially in the RMB5000-6000 (US$700-800) price band.
Gurman: Next New Macs in Early 2023
No new Macs for the rest of the year — That is the latest pronouncement from Bloomberg’s Mark Gurman. We talked here Friday about how that seemed to be what Apple execs were saying during last Thursday’s Q4FY22 earnings call. The part where Apple CEO Tim Cook referred to the company’s “product lineup” as “set” heading into the holiday season was one tell. Still a greater tell was Apple CFO Luca Maestri saying Mac sales for the current quarter are up against a particularly tough compare. For this quarter last year, he pointed out, Apple had new Macs to offer. Though he did not say specifically that Apple will not have new Macs to offer this quarter — both he and CEO Cook seemed to be indicating that without explicitly saying it.
Now, a piece from MacRumors has Bloomberg’s Gurman saying in Sunday’s Power On newsletter that Apple will hold off on new Macs until early next year. Quoting Gurman:
I’m told that Apple is aiming to introduce the upgraded models—including M2-based versions of the 14-inch and 16-inch MacBook Pros—in the first quarter of calendar 2023.
Yes, in case you’re wondering, this is the same Mark Gurman who was saying as recently as August that we’d be getting new Macs from Apple in November. There seems more reason to believe him this time.
Targets Fall as Analysts React to Apple Earnings and Commentary
A few price targets fell in the wake of Apple’s September-quarter earnings last week. Most of the lowered targets I saw didn’t have associated notes, leaving one to assume that the reductions were indicative of current market realities, rather than anything specific to Apple. Big thanks to Philip Elmer-DeWitt at Apple 3.0 for doing his usual reaction round-up. It is there that we see Keybank analyst Brandon Nispel sticking with his “Overweight” rating on Apple shares, though dropping his 12-month price target on the shares from $185 to $177. That same round-up had Citi analyst “Gentleman” Jim Suva keeping a “Buy” rating on Apple, but dropping his target from $185 to $175, and Deutsche Bank analyst Sidney Ho staying positive on Apple shares while dropping his target from $175 to $170.
One notable reduction came from Wedbush analyst Daniel Ives, and it did have a note with it. Quoting that:
…Apple delivered a mixed September quarter that featured top and bottom-line beats despite (…) FX headwinds in the quarter. In a horror show week for Big Tech earnings, Apple was the one bright spot as iPhone demand was relatively strong despite the macro with a heavy iPhone 14 Pro mix seen in the quarter.
He’s still got an “Outperform” rating on Apple shares, but — you know — the times are what they are. He lowered his price target on the shares from a Street high $220 down to a still sky-high $200.
Of Bulls and Bears
In a sort of “Tale of Two Earnings Calls” pair of takes, BofA analyst Wamsi Mohan says Apple’s December commentary was inline with expectations despite the quarter’s extra week. That looks like trouble to him. At the same time, Morgan Stanley analyst Erik Woodring cited a “Solid Sept Q” and “Better Than Feared” December commentary that was “above consensus.” Mohan has a “Neutral” rating on Apple shares and a price target of $160. Woodwring has an “Overweight” rating on Apple shares and a price target of $177.
Interesting to hear an Apple Bull and the Bernstein Bear ask the same question. Evercore analyst Amit Daryanani’s note says, “Eventually the question will be on durability of demand beyond Dec-qtr and the impact from macro not just on iPhones but also services.” Bernstein Resarch analyst Toni Sacconaghi’s note sailed in under a similar sentiment: “No fireworks … but can Apple grow in FY23?” That said, he’s not the hater you might expect. “Amid a sea of large cap earnings debacles,” said Sacconaghi’s note, “Apple’s Q4 results appear to be a relative victory.” He’s got a “Market-Perform” rating on Apple shares and a price target of $170. Daryanani has an “Outperform” rating on Apple shares and a price target of $190.
Most of the rest of the notes I glimpsed carried the same basic sentiment: Strong quarterly performance, especially considering #TheseTimesinWhichWeLive.
Ticketmaster Giving Away Tix for Apple Music Live: Megan Thee Stallion Show
There’s “live” and there’s “recorded live.” Apple Music Live is once again opting for the latter. A piece from AppleInsider says:
The next Apple Music Live event will feature Megan Thee Stallion performing in Hollywood — an in-person live concert on November 11, streaming December 21.
If you live in the greater Los Angeles area, you can apparently try for tickets. The report says they’re “being offered for free via Ticketmaster.”
Three Apple TV+ Titles Up for Five Gotham Awards
And finally today, the never ending award season rolls on. The Mac Observer ran a piece last week announcing five Gotham Awards nomination for Apple TV+. According to Apple’s press release on the nominations:
The Gotham Awards honors visionary talent in front of and behind the camera, expands the audience for groundbreaking film and television and supports the year-round work of the not-for-profit The Gotham Film & Media Institute.
And the Apple nominees are… fighting each other, in a couple of categories:
- Both Pachinko and Severance were nominated for Breakthrough Series — Long Format (Over 40 minutes)
- Both Minha Kim from Pachinko and Britt Lower from Severance were nominated for Outstanding Performance in a New Series
As for the fifth nomination, off on his own is Brian Tyree Henry. Well … not on his own, but not competing against other Apple TV+ performers. He’s nominated for Outstanding Support Performance for his part in the film Causeway.
Apple TV+ is not new to the Gotham Awards. Two actors for last year’s CODA picked up trophies in 2021. The film’s lead, Emilia Jones, won Breakthrough Performer, while eventual Academy Award winner Troy Kotsur won for Outstanding Supporting Performance.
The ceremony for this year’s 32nd Annual Gotham Awards is set to take place on Monday 28 November in New York City.
Today on The Mac Observer’s Daily Observations Podcast
COVID is playing havoc with iPhone production and workers are getting tired of it. TMO Mangling Editor Jeff Guts joins me on this Halloween edition to talk about production bumps and reading iPhone availability in the months ahead. Plus — the guy who said new Macs next month now says next year instead. That’s all today on the Daily Observations Podcast from The Mac Observer.