Smartphone Shipments Are Imploding. Is Apple's iPhone Next?
Demand for smartphones fell nearly 20% last year, IDC data showed. Now we're about to find out what that means for Apple.
Apple's iPhone 14 Pro was hard to come by during the holidays.
Tech tends to be one of the top gifts during the holiday shopping season, and Apple is one of the most popular brands among them. The company sold $71.6 billion worth of iPhones last year, enough to be a Fortune 50 company on its own. So, what happens when that demand collapses?
Apple on Thursday will be reporting its first fiscal quarter earnings, covering sales during the just-ended holiday shopping season. And it's likely to be rough.
Phone and computer manufacturers have been seeing sales drop precipitously from their pandemic highs, and while the holidays tend to be a popular time to buy tech devices, this past holiday shopping season isn't shaping up to have been great. Smartphone shipments around the world dropped a record 18% from the year prior, according to surveys from IDC, the largest-ever decline for the industry. PC shipments, meanwhile, dropped an even more dramatic 28% from the prior year.
Now, Apple watchers are about to learn what that means for the iPhone and the Mac. Analysts on average are already projecting profits to fall to $1.94 per share, according to surveys published by Yahoo Finance, down more than 7% from the same time a year ago. Sales, meanwhile, are expected to fall to about $121.6 billion, down nearly 2%.
None of this is much of a surprise, since Apple and Wall Street analysts alike have been warning about production slowdowns in China, driven by COVID-19 lockdowns that ended late last year. That many would-be iPhone 14 Pro owners in particular to spend more time waiting or hunting for their devices, which start at $999 (£1,099, AU$1,749). Here at CNET, we heard so many people needed help finding them that we published a guide for how to find one amid the many supply shortages.
Now that buying an iPhone is as easy as buying direct from Apple and having it shipped the next day, the question analysts and investors are asking is whether the people who couldn't buy an iPhone earlier waited, or whether they gave up and went with a competitor.
"December Pain = March Gain?" Evercore analyst Amit Daryanani said in a note to investors Monday. Aside from readily found supplies, Evercore also said data about luxury goods sales in China suggested that many people's fears of a larger recession this year may have been overblown. "The month of January and onwards ought to be stronger than usual given that the unmet demand."
Apple didn't respond to a request for comment ahead of its earnings.
Apple released new laptop and desktop computers after the holiday shopping season.
Tech pain
If people buy enough iPhones to power Apple through economic uncertainty, industry watchers wonder what will happen to the company's workforce. So far, nearly every tech giant has instituted layoffs, blaming in part a frenetic hiring spree during the pandemic.
Apple, for its part, has frozen hiring in some areas, and Apple CEO Tim Cook has volunteered to reduce his potential future compensation.
Analysts so far don't seem concerned that Apple may be in a similar position as Amazon, which eliminated 18,000 jobs, Microsoft, which laid off 10,000, or Meta and Google, which together laid off an additional 23,000. All told, an estimated 235,596 people lost their jobs across tech in the past year, according to Layoffs.fyi, an industry tracker.
"We see tremendous value in the Apple ecosystem and its ability to monetize its user base," Oppenheimer analysts wrote in a note late last year, after discussing how supply shortages may hurt Apple's financials for the short term. In Wall Street speak, that means they believe Apple will find ways to make more money from people who already buy its products, such as through its Apple TV Plus subscription service, which costs $7 a month. "Our long-term bullish view on Apple is unchanged."