Apple Inc has asked suppliers to produce at least as many of its next-generation iPhones this year as in 2021, counting on an affluent clientele and reduced competition to weather a global electronics downturn.
The tech giant is ordering its assemblers to produce 90 million of its latest devices, on par with last year, despite a worsening forecast for the smartphone market, according to people familiar with the matter. The Cupertino, Calif.-based company still expects to build about 220 million iPhones in 2022, also about the same level as last year, according to one of the people.
Apple’s forecasts, which are kept strictly confidential, suggest that the company is confident of coping with falling costs of smartphones and other devices. Mobile device makers have started freezing orders, China’s biggest chip maker warned on Friday. The global phone market, which fell 9% in the June quarter, is expected to shrink 3.5% in 2022, IDC predicts.
Shares of Apple suppliers in Asia rose on the news. Taiwanese iPhone assembler Pegatron Corp jumped 3.6% in its biggest gain in five weeks, while Japan Display Inc posted its biggest gain in two months at 5%. TDK Corp rose 5.3% and Murata Manufacturing Co rose 3.7%.
At a time when Android devices are suffering, the increased demand for Apple’s new lineup is due to a customer base still willing to spend on premium gadgets, the people said. The de facto demise of Huawei Technologies Co has also reduced competition in the high-end smartphone space.
Hon Hai Precision Industry Co, which makes most of the world’s iPhones, hinted at Apple’s resilience when it said this week that sales of smart home electronics would be little changed in 2022. An Apple representative declined to comment.
The world’s most valuable company has vowed to remain disciplined on spending as economic and geopolitical uncertainty cloud its outlook for 2022 and beyond. Last month, Bloomberg reported that Apple would cut costs and hire some of its teams in 2023.
Cooler-than-expected U.S. inflation this week bolstered hopes that interest rate hikes will not be as aggressive as expected. But market watchers warn that the economic outlook remains bleak.
What Bloomberg Intelligence Says
Apple’s near-to-mid-term sales percentage growth is likely to remain in the mid-single digits, driven by product refresh cycles and sales of add-on services for an installed base of more than 1.8 billion active devices. Soaring inflation, war in Europe and lingering Covid-19 restrictions in China could lengthen the product refresh cycle, hurting sales growth in fiscal 2022 by 2% to 3%, compared to the consensus estimate of $394 billion.
Apple’s excessive exposure to China for manufacturing is a major concern, and any disruptions due to parts shortages or geopolitical issues could severely hamper its ability to meet demand.
— Anurag Rana, analyst
Still, Apple is ahead in plans for its marquee device, which generates about half of its revenue and is the main gateway to profitable services.
According to Bloomberg News, Apple plans to release four new iPhone models that it hopes will be more popular than the 2021 versions. The iPhone 14 Pro models are expected to include a significantly improved front-facing camera, a new rear camera system that includes a 48-megapixel sensor, thinner bezels, a faster A16 chip, and a redesigned pill-shaped notch. for Face ID and a hole punch for the camera.
By 2021, Apple has maintained a consistent level in recent years of around 75 million units for the initial release of a new device by the end of the year. The company has raised its 2021 target to 90 million, expecting the first new iPhone since the spread of Covid vaccines to unlock additional demand.
The company, whose iPhone assemblers include Pegatron Corp., posted record sales and profits that fiscal year.
The iPhone should once again fuel Apple’s growth this year. Both Apple’s iPhone and iPad performed better than expected in the June quarter, although other products, including Macs and wearables, fell short of forecasts. Services, a key growth area for Apple, barely met estimates.
Apple does not appear to see “any significant impact on the iPhone business in the current macro environment,” analysts Piper Sandler wrote after the results.
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