iPhone 5 Cutbacks Simply Due to Initial Shipment Rate Being Too Large to Maintain?

[MacRumors]

While questions remain about claims from earlier this week that Apple has slashed iPhone 5 component orders, CNET is now reporting on market research firm DisplaySearch senior vice president Paul Semenza's comments on how the iPhone 5's initial shipment ramp was simply too large to maintain.

"It was a very quick ramp up. The Q4 [estimate] was about 61 million [for the iPhone 5]...that may be dialed back a bit, but anything near that number is still huge," he said, referring to an estimate of display shipments for the iPhone 5.

"That would support the theory that the ramp was too much to sustain."

CNET mentions that the first quarter of sales for the iPhone 4S registered far below that for the iPhone 5, providing little reason for such a strong decline in iPhone 5 interest. Yesterday, Semenza told The New York Times that Apple had cut its display order from 19 million to 11-to-14 million for January, noting that demand from Apple had been "corrected significantly." But he also mentioned to CNET that he'd heard of changes to orders before the new year.

Theories abound as to the just how much Apple has cut component orders and the reasons for those cuts, but many believe that improving yields and aggressive ramping during the holiday quarter may simply have left Apple with an oversupply of parts heading into the new year. Combining that excess inventory with a natural slowdown following the strong launch quarter for the device could lead to substantial reductions in part production. Still, it seems unlikely that Apple would have miscalculated component demand for the current quarter by the nearly 50% number originally cited by Nikkei and The Wall Street Journal.

Recently, it's been reported that Apple is prepping iPhone 5S production for March ahead of a release in June or July, a rapid update cycle that could also be forcing adjustments in Apple's component orders.

Article Link: iPhone 5 Cutbacks Simply Due to Initial Shipment Rate Being Too Large to Maintain?

[kjs862]

I don't think so. Sounds off with supply chain guru Cook in the driver seat.

[needfx]

Originally Posted by kjs862

I don't think so. Sounds off with supply chain guru Cook in the driver seat.

Maybe he didn't factor-in the higher price when calculating demand estimates

[r2shyyou]

Here's a good piece to consider:

Via Forbes: Why The WSJ Got The 'iPhone Demand Is Crashing' Story All Wrong

[Peace]

Originally Posted by r2shyyou

Here's a good piece to consider:

Via Forbes: Why The WSJ Got The 'iPhone Demand Is Crashing' Story All Wrong

And it's perpetuated by bloggers that want to drive the price of Apple down in order to make money on the stock's rise due to stories like this.

Why isn't this story front page ?

[r2shyyou]

Originally Posted by Peace

And it's perpetuated by bloggers that want to drive the price of Apple down in order to make money on the stock's rise due to stories like this.

Why isn't this story front page ?

I suppose it's because it hasn't been proven. But I agree.

EDIT: Hmm...

So here is our logic to being patient. It is threefold:

1. Apple had an enormous amount of call options speculation related to its Summer surge
2. A huge share of this was calls with a strike of around the current price of $550 and higher that expire January 19 2013
3. The institutional money managers that wrote those call options and bought common stock to cover will make a lot of money if a) those options expire worthless, and then b) Apple runs after that expiration date

What kind of money are we talking? Let's use the more than 60,000 calls with a $600 strike price. If Apple goes to $700 before January 19, then those options have an intrinsic value of:

60,000 (call options) X 100 (shares per option) X $100 (intrinsic value per share) = $600,000,000

Six hundred million dollars not in the institutional call writers' pockets. Whereas, if Apple stays put, then runs to $700 after the expiration date, the call writers get the capital gain from the common stock they covered with, AND the entire amount for which they sold the option. And this is only one strike price we calculated - together this is billions of dollars for a two month delay in an Apple surge.

Source: http://seekingalpha.com/article/1002...-on-january-18

[jclardy]

Originally Posted by kjs862

I don't think so. Sounds off with supply chain guru Cook in the driver seat.

Does it though? Maybe he purchased the huge order to get lower prices. Now they cut it in half since they have all the devices they need.

Lower per-device cost + meeting holiday demand sounds like a good plan to me.

[firewood]

Apple needed to order components ahead and produce iPhones and iPod Touches faster than they could sell them in order to stock up inventory for the holiday buying rush. Now that the holiday rush is over, sales may still be decent, but Apple no longer needs to build inventory ahead of a new rush. Sales normally taper for all vendors after the holidays. Joe consumer is spent out and looking at some just arriving scary credit card bills (but rinse-and-repeat next year).

However the stock price swings are likely mostly due to market manipulation combined with investor psychosis.

[Bathplug]

Nice spin lol

[arcite]

The iphone 5 is still selling BIG by any metric, just not quite as big as a couple analysts predicted. Pile in on cheap apple stock I say!

[syd430]

Originally Posted by arcite

The iphone 5 is still selling BIG by any metric, just not quite as big as a couple analysts predicted. Pile in on cheap apple stock I say!

Actually it is the expectations of future cash flows that determines the stock price, not what you think is a reasonable profit. A relatively low P/E =/= cheap stock if earnings aren't in line with expectations.

[Kwill]

Before Samsung became a contender, Apple could leisurely release iPhones on a yearly cycle. Now for every one iPhone model, competitors release two. If the annual cycle continues, Apple will be (and arguably has been) left behind.

Ramp down the spaghetti iPhone. Bolster the features before September. Last year Apple demonstrated this propensity with the iPad.

[Northgrove]

Originally Posted by Bathplug

Nice spin lol

This one or the one in the WSJ report?

I find it hard to judge whether the WSJ report was worded so that it'd work well as simple clickbait, and what's spun or not. There are so many different interests at play here. I'll just watch this unfold without forming an opinion one way or the other for now. We'll know more in just about a week anyway, with the earnings release.

[ThatsMeRight]

iPhone sales were, without doubt, still extremely high during the holiday season, but I actually hope that sales are lower than expected.

Why? It sends Apple a message that bigger upgrades are needed. A few years ago, I remember Apple as the company that had the best software combined with great hardware.

The iPhone 5 isn't a bad phone. In fact, it's a really good phone. When you asked me in 2010 which phone was the best smartphone? iPhone 4. It had hardware similar or better than that of top competitors and it had just received a huge software upgrade (iOS 4, which brought stuff like multitasking).

Last year, I'd probably still say the iPhone 4S. While Android (and Windows Phone) was gaining terrain, the iPhone 4S still had the best over-all package.

This year, I'd say you can't go wrong with any high-end smartphone: Nokia Lumia 920, HTC One X, Samsung Galaxy S III, iPhone 5. Why? Because of the software: Android has made huge jumps compared to iOS - and Microsoft has brought a refreshing mobile OS to the market.

And look what is coming this year!
Android is getting more refined and more refined, basically, by the day. iOS 7 needs to be big. It needs to change, even if it is only for change's sake. People like new, fresh, shiny things. Apple has been playing it safe with iOS 5 and iOS 6.

And look what is coming on the hardware side: quad-core Cortex A15 CPUs and even more powerful GPUs. Bigger batteries which will probably give us much better battery life. Drastically improved cameras (Nokia PureView, anyone?).

Again: Apple has been playing it safe. They change things, but not too much. iOS 6 is really, really similar to iOS 5. And iOS 5 is quite similar to iOS 4. And being careful with changing things is okay, but once in a while you need to take a risk: you need to throw things overboard and start with a fresh design. Start with drastically new features. You need to take a risk like Microsoft did with Windows 8.

Same on the hardware side: Apple is playing it safe. They gave the iPhone 5 a bigger display: big enough to attract users who want a bigger display, but small enough to make sure they won't lose any customers who preferred the 3.5" display.

Apple in 2008/2009/2010 would have taken more risks. More drastic changes to iOS. Back in 2010, they gave us multitasking while - as it is reported - they weren't willing to give it to us at first. It would make things too complicated. Looking back, giving us multitasking was a great idea because there are now so many great new apps which make great use of it (like Spotify).

Back in 2008, Apple gave us the App Store. According to the news articles I read, Apple - at the time - wasn't really willing to do this (they were 'all-in' on web apps) but if we look back this was a great choice. They took the risk and it paid off.

In 2010 they gave us a 960 x 640 3.5" display. 326 pixels per inch. Such a high pixel density: unheard of.

Apple needs to take risks. Give iOS a redesign so it looks drastically different, but - hopefully - still works quite the same. Add drasticly better internals: push camera technology. Push battery technology. Push CPU and GPU technology. And more importantly: try out new technologies (like Senseg's tactile feedback technology).

Come on, Apple. Take some risks. Up the game.

[rmwebs]

Originally Posted by ThatsMeRight

<snipity snip>

Spot on.

Apple invented a fantastic device, and kept improving it up to the iPhone 4. However since then its stagnated, with very little in the way of improvements.

Over the last 2 years their competitors (namely Samsung) have upped their game, and now have a product that many now consider to be better, or at very least on par.

Apple needs to go back to the drawing board and re-re-invent the iPhone again. There are a slew of features that could be improved/added to the iPhone. Wasting time on things like maps is just reducing the amount of great developers that could be working on more useful apps and features.

I'd hope that the next iPhone looses the trademark dull 'slab of glass, bit of aluminium and a button' image as its getting to be very tired. That and an overhaul of iOS. They cant treat it like Mac OS X and just redesign it once every 12-14 years.

Putting this aside. Even the biggest fanboy has to admit this simple little fact:

Samsung is the best thing that could have happened to the iPhone and Apple. It's forcing them to develop the iPhone instead of doing a slow release cycle (ala iPod). Without Samsung pushing like hell, the iPhone would not be what it is today.

Obviously they cant take all the credit, Google has been doing a bloody fantastic job with Android, and the other big players such as HTC have been releasing some pretty popular products.

[OldSchoolMacGuy]

No one bothered looking at the numbers here. The numbers in the initial report didn't add up at all. Forget reading into it though, just repost it on Macrumors.

No one also bothered to realize that the report was talking about the screens used which are also used in iPod Touchs and could be related to a cut back of those rather than iPhones.

[nep61]

Originally Posted by OldSchoolMacGuy

No one bothered looking at the numbers here. The numbers in the initial report didn't add up at all. Forget reading into it though, just repost it on Macrumors.

No one also bothered to realize that the report was talking about the screens used which are also used in iPod Touchs and could be related to a cut back of those rather than iPhones.

You're right....

http://www.forbes.com/sites/markrogo...n-to-the-core/

[darkplanets]

We don't know the reasons, and probably won't. Whether it's this or inaccuracies in use for displays, or other factors, it was wholly irresponsible for media outlets (even Forbes and WSJ) to publish the drivel with the notion of causality without fact checking. Same goes for MR. Shame on you for posting drivel in the name of clicks without substantiating if it is a possibility. Unless the causality is verified, don't display it as fact.

What is apparent, and was from the start, was that these media outlets were probably unwittingly playing into someone's scheme to short the stock. This hasn't been the first time it's happened to Apple, and is pretty common with most high-value stocks.

[FireFish]

[iMikeT]

I was thinking something along the lines of this article that the cutbacks were due to either Apple all ready meeting a certain level of demand or just ordering too much to begin with.

Originally Posted by OldSchoolMacGuy

No one bothered looking at the numbers here. The numbers in the initial report didn't add up at all. Forget reading into it though, just repost it on Macrumors.

No one also bothered to realize that the report was talking about the screens used which are also used in iPod Touchs and could be related to a cut back of those rather than iPhones.

Exactly. It's the sad state of journalism in the modern day. Put out an eye catching headline that gets clicks instead of reporting the facts. What's worse is something like this gives the Apple haters more fuel for their hate.

Originally Posted by gatearray

Ask MS how taking that "risk" is working out for them! Throwing things overboard and starting with a fresh design is what you do when you're desperate, sitting on a failing product line and/or strategy, and generally behind the eight ball, present-day RIM is another example.

Apple sees tremendous growth every quarter, with each new iPhone iteration has sold more units that the previous gens combined. I don't think they'll be adopting your proposed strategy anytime soon.



Again, your specious reasoning is showing!

You say they weren't willing to "give it to us", and even suggest that it turned out to be a "good idea" in the end, as if those mean old jerks at Apple got it wrong.

I say that until iOS4 and the A4 chip, Apple couldn't achieve the desired level of user experience, and only added this functionality in iOS 4 when it was ready for Primetime, as they say.

Honestly, which explanation is more plausible?

I agree with everything you said. And as I usually say, it's easy to criticize something in hindsight long AFTER a product has been on the market and after the implementations are mainstream and seem "obvious". Don't get me wrong, I'm not defending Apple as I am equally critical of them as I am of Microsoft or Google, but I find Apple to be the low-hanging fruit that people pick (yes every pun intended) simply because they came out with products that standardized the industry and the competition simply copies and builds on.

I think the people who make the most criticism do so from their armchair and are merely consumers with very narrow minds and fail to see the much larger picture. It's easy to criticize the work of others, how about these critics put their ideas out there for a change?

[Mr-Kerrse]

I dont understand the constant moaning about the iphone 5, i like my iphone 5 & yes it is different to the 4s as it is much faster & i like the screen being longer not wider as i don't want a huge phone.

Stop worrying about the iphone keeping up with the competition & enjoy it for what it is, if you don't like Apple products then buy a different make !

[SockRolid]

Originally Posted by rmwebs

[...] and the other big players such as HTC have been releasing some pretty popular products.

Popular? Compared to what, exactly? Are you talking about HTC smartphones?
HTC's Q3 2012 smartphone shipments were down more than 42% from Q3 2011.

From The Next Web:

Q3 research figures from IDC give HTC a 4 percent share of quarterly shipments with 7.3 million smartphone units shipped. That’s a 42.5 percent drop on the 12.7 million devices a year previous, when it held a 10.3 percent share of overall shipments.

Full story: http://thenextweb.com/asia/2012/10/2...2012-forecast/

Oh, and HTC's overall income dropped 79% year-over-year in Q3 2012.

From Android Community:

It is quite easy to see where this substantial drop is a serious problem for HTC. Even though HTC predicted decreased numbers, seeing them finalized on paper is a scary thing.

Full Story: http://androidcommunity.com/htc-q3-i...year-20121008/

[blackcrayon]

Originally Posted by ThatsMeRight

Push CPU and GPU technology. And more importantly: try out new technologies (like Senseg's tactile feedback technology).

Come on, Apple. Take some risks. Up the game.

Apple could hardly push CPU and GPU technology any harder, they bought their own chip design companies in house, made a hand laid out exceptional SoC in the A6, and they clearly haven't been messing around when it comes to the GPUs they've been using.

[gatearray]

Originally Posted by ThatsMeRight

... you need to throw things overboard and start with a fresh design. Start with drastically new features. You need to take a risk like Microsoft did with Windows 8.

Ask MS how taking that "risk" is working out for them! Throwing things overboard and starting with a fresh design is what you do when you're desperate, sitting on a failing product line and/or strategy, and generally behind the eight ball, present-day RIM is another example.

Apple sees tremendous growth every quarter, with each new iPhone iteration has sold more units that the previous gens combined. I don't think they'll be adopting your proposed strategy anytime soon.

Originally Posted by ThatsMeRight

... they weren't willing to give it to us at first. It would make things too complicated. Looking back, giving us multitasking was a great idea because there are now so many great new apps which make great use of it (like Spotify).

Again, your specious reasoning is showing!

You say they weren't willing to "give it to us", and even suggest that it turned out to be a "good idea" in the end, as if those mean old jerks at Apple got it wrong.

I say that until iOS4 and the A4 chip, Apple couldn't achieve the desired level of user experience, and only added this functionality in iOS 4 when it was ready for Primetime, as they say.

Honestly, which explanation is more plausible?

[applesith]

Who cares. The doom and gloom news already dragged my AAPL. Media loves to pick favorites. Where was the reporting that FB search graph is crap and should have been included in FB years ago? No, instead we have to hear about every anecdotal potential hiccup at apple as 100% true facts.