Apple has asked suppliers to build at least as many of its next-generation iPhones this year as in 2021, counting on an affluent clientele and dwindling competition to weather a global electronics downturn.
The tech giant is telling its assemblers to make 90-million of its newest devices, on par with last year, despite deteriorating projections for the smartphone market, according to people with knowledge of the matter. The Cupertino, California-based company still expects to assemble roughly 220-million iPhones in total for 2022, also about level with last year, according to one of the people.
Apple’s projections, a closely guarded secret, suggest it is confident about weathering a slump in spending on smartphones and other devices. Mobile device makers have begun freezing orders, China’s largest chipmaker warned on Friday. The global handset market, which slid 9% in the June quarter, is expected to shrink 3.5% in 2022, the International Data Corporation has forecast.
Shares of Apple suppliers in Asia rose on the news. Taiwanese iPhone assembler Pegatron jumped as much as 3.6% in its biggest gain in five weeks, while Japan Display logged its biggest two-month rise of 5%. TDK Corporation rose as much 5.3% and Murata Manufacturing gained 3.7%.
Premium gadgets
At a time when Android devices are suffering, the stronger demand for Apple’s new line-up stems from a customer base still willing to spend on premium gadgets, the people said. The virtual demise of Huawei Technologies also has eroded competition in high-end smartphones.
Hon Hai Precision Industry, which puts together most of the world’s iPhones, hinted at Apple’s resilience when it said this week that sales of its smart consumer electronics products should be little changed in 2022. A representative for Apple declined to comment.
The world’s most valuable company has promised to be disciplined about spending as economic and geopolitical uncertainty clouds the outlook for 2022 and beyond. Bloomberg reported last month that Apple would slow spending and hiring across some of its teams in 2023.
This week, a cooler-than-anticipated US inflation reading buoyed hopes that interest rate hikes will not be as aggressive as thought. But market observers cautioned the economic outlook remained bleak.
Apple’s near- and midterm percentage sales growth is likely to remain in the mid-single digits, spurred by product-refresh cycles and sales of additional services to its installed base of more than 1.8-billion active devices. Spiking inflation, war in Europe and lingering Covid-19 restrictions in China could elongate the product-refresh cycle, hurting financial 2022 sales growth by 2%-3% versus consensus of $394bn.
China manufacturing
Apple’s overexposure to China for manufacturing is a major concern, and any disruptions due to either parts shortages or geopolitical issues could seriously hinder its ability to fulfill demand, said analyst Anurag Rana,
Still, Apple’s soldiering ahead with plans for its marquee device, which accounts for about half of if its revenue and is the main gateway to profitable services.
Apple is set to launch four new iPhone models that it hopes will break more ground than 2021 versions, Bloomberg News has reported. The iPhone 14 Pro models are expected to include a much-improved front-facing camera, a new rear-camera system that includes a 48-megapixel sensor, thinner bezels, a faster A16 chip, and a redesigned notch with a pill-shaped cut-out for Face ID and a hole punch for the camera.
Before 2021, Apple had maintained a consistent level in recent years of about 75-million units for the initial run of a new device through the end of the year. It upgraded its target for 2021 to 90-million, anticipating the first new iPhone since the rollout of Covid vaccines would unlock additional demand. The company, whose iPhone assemblers include Pegatron Corporation, posted record sales and profit that financial year.
The iPhone should again fuel Apple’s growth this year. Apple’s iPhone and iPad both performed better than feared during the June quarter, though other products — including Macs and wearables — fell short of projections. Services, a key growth area for Apple, narrowly missed estimates.
Apple seems to be witnessing “no meaningful impact on its iPhone business in the current macro environment,” Piper Sandler analysts wrote after its results.
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