Why Is Anyone Surprised iPhone Sales Might Be Slowing?

Even before Apple introduced its iPhone 6s and 6s Plus, we predicted that Apple would struggle to match the boffo sales of its first generation of big-screen smartphones, the iPhone 6 and 6 Plus. We said it in just that many words:


The company will have a tough time topping the blockbuster performance of last year’s iPhone 6 and 6 Plus, which propelled the company to record profits and helped it briefly claim the title of China’s top smartphone maker.

… Research firm International Data Corp. forecasts iPhones sales will be down in the first quarter of availability, because of the difficult comparisons to the record 74.5 million devices Apple shipped in the December quarter after the launch of the iPhone 6 and 6 Plus.

“They almost doubled quarter-on-quarter shipments in the fourth quarter [of the calendar year],” said IDC analyst Ryan Reith. “They beat every single analyst forecast. It’s tough to repeat that.”

Apple’s iPhone sales fall into a fairly predictable two-year cycle, with a year of major upgrades followed by modest improvements for the “s” model. We noted, back in September, that it seemed doubtful that incremental upgrades like a faster main processor or upgraded camera would fuel strong year-over-year sales growth — citing the example of iPhone 5s sales.


The iPhone 5s captured 66 percent of the company’s smartphone sales in its introductory quarter, according to International Data Corp. Though the smartphone was the first of Apple’s mobile devices to offer the Touch ID fingerprint sensor, that feature wasn’t enough to make a meaningful difference. In the launch quarter, Apple’s smartphone sales rose by a modest 7 percent following its September 2013 introduction — one of only two times that Apple posted less than double-digit gains in the inaugural quarter of one of its newly introduced phones.

When Apple reported record initial weekend sales of the iPhone 6s and 6s Plus, we noted the smartphone sales benefitted from being available at launch in China — a critical market that accounts for about a quarter of the company’s revenue. That wasn’t the case with the iPhone 6 introduction.

Apple Chief Executive Tim Cook sought to reassure Wall Street that smartphone sales would continue to grow in the December quarter — but didn’t go any further.

Even the usually bullish FBR Capital Markets analyst Daniel H. Ives predicted rough waters ahead, lowering his iPhone shipment forecasts amid signs of softer iPhone 6s demand.

While 6s demand has not been stellar out of the gate relative to bullish Street expectations, we believe this near-term product transition period will ultimately lead to brighter days ahead on the shoulders of the flagship iPhone 7 release as Apple is poised to benefit from pent-up consumer demand/mega product cycle heading into September 2016, in our opinion. After a euphoric iPhone 6 product cycle, Apple and Cook now face a pivotal “make or break” iPhone 7 product cycle, which will dictate the future growth story at Apple.

So, today’s news out of China is hardly a surprise. The Wall Street Journal reports that Apple is scaling back orders for its iPhones, and that component makers are bracing for lower sales.