Apple iPhone sales have peaked? Not so fast

Reports say Apple has scaled back orders to iPhone-component makers, as it works to clear unsold inventory. But that doesn't necessarily mean the phone's popularity is waning.

Katie Collins Senior European Correspondent
Katie a UK-based news reporter and features writer. Officially, she is CNET's European correspondent, covering tech policy and Big Tech in the EU and UK. Unofficially, she serves as CNET's Taylor Swift correspondent. You can also find her writing about tech for good, ethics and human rights, the climate crisis, robots, travel and digital culture. She was once described a "living synth" by London's Evening Standard for having a microchip injected into her hand.
Katie Collins
3 min read

Apple will apparently be making fewer smartphones at the start of this year, and some are taking it as a sign that the iPhone is in trouble. If only it were that clear-cut.

The company, based in Cupertino, California, is expected to trim the number of iPhones it makes by around a third in the first three months of 2016, according to a report Wednesday from Japanese business publication Nikkei Asian Review.

Suppliers that provide Apple with parts for the iPhone have reported scaled-back orders, which has led multiple investment firms to the conclusion that production of the smartphones will decrease.

Concerns have been circulating in the media and among investment firms that Apple may have reached "peak iPhone". With the smartphone market saturated and most people who want an iPhone now owning one, sales can't possibly continue to grow -- or so the argument goes. The reality is more complex: Even if production numbers are temporarily reduced and Apple has a slower few months, that doesn't automatically mean overall demand for the iPhone is shrinking or that a quieter period portends a long-term global slowdown.

Apple is scaling back iPhone production until the April-June quarter, according to a report.

Andrew Hoyle/CNET

Sales of the iPhone 6S and 6S Plus, which launched in September 2015, have been lackluster in comparison with those of the iPhone 6 and 6 Plus, the year before, said the Nikkei report. That could be because the latest models brought no real wow factor over the previous year's iPhone 6 and 6 Plus models, or because those earlier models sold in record numbers and consumers aren't ready yet to upgrade.

Meanwhile, investment firm Morgan Stanley attributed a decline in sales at the end of last year to higher prices in foreign markets due to fluctuations in currency values.

And that's led to a surfeit of unsold iPhones that's built up around the world, including in the US, Europe and Asia, said the Nikkei report. The cutback in production would allow for a clearing out of unsold stock of the iPhone 6S and 6S Plus. Production is expected to return to normal in the April-June quarter.

Some analysts are arguing the Nikkei report doesn't show the full picture. Production numbers often bear little relation to final sales, PiperJaffray analyst Gene Munster told AppleInsider. For an accurate understanding of iPhone sales figures, it's best to look directly at Apple data, he said, adding that the latest guidance from the company's chief executive, Tim Cook, was that iPhone sales were forecast to grow year on year.

In the latter months of 2016, Apple is widely expected to introduce a bigger leap forward with its iPhone 7.

Brean Capital computer hardware analyst Ananda Baruah predicts that Apple could see an increase of up to 10 percent in iPhone sales in 2016 from the previous year. Demand for the iPhone is particularly strong and is growing in China, said a December report from Morgan Stanley, as cited by Bloomberg.

Last year Apple dominated the smartphone market in the US ahead of its closest rival Samsung, a trend that has been reflected around the world, Moor Insights and Strategy analyst Patrick Moorhead told Reuters. "Apple has been gaining significant market share in pretty much every region, and I'm not seeing a global slowdown," he said.

Apple did not respond to a request for comment.