Demand for the iPhone 13 has dropped, Apple announces to suppliers ahead of the holiday season

Apple, which is suffering from a global supply crisis, is now facing another problem: slowing demand.

The company told its component suppliers that demand for the iPhone 13 range has dropped, people familiar with the matter said, noting that some consumers have decided not to try to get the hard-to-find item.

Apple has already reduced its production target for the iPhone 13 this year by up to 10 million units, down from the 90 million target due to a lack of parts, Bloomberg News reported. But the hope was to make up for much of this deficit next year – when supply is expected to improve. The company is now informing its sellers that those orders may not materialize, according to people who asked not to be identified because the talks are private.

The company is still on track for a record holiday season, with analysts forecasting a 6% increase in sales to $ 117.9 billion (about $ 8.84,055 million) in the last three months of the calendar year. But it will not be the successful quarter that Apple – and Wall Street – originally imagined. Lack of delivery and delays have frustrated many consumers. And with inflation and the omicron variant bringing new concerns to pandemic-weary buyers, they may give up some purchases.

That could mean skipping the iPhone 13 altogether and waiting to upgrade next year when its successor appears. The current range, starting at $ 799 (about Rs 59,890) for the standard model and $ 999 (about Rs 74,890) for the Pro, is considered a modest upgrade from the iPhone 12, which had a completely new design. Bigger changes are expected for the 2022, giving buyers a reason to wait.

Apple, based in Cupertino, California, declined to comment.

The iPhone is Apple’s flagship product, accounting for about half of its $ 365.8 billion (about $ 27.42,200) revenue in the last fiscal year, and the launch of the upgrades is a delicate dance. With the iPhone 13, Apple and mobile operators have launched aggressive discount programs to boost purchases. In some cases, owners of an iPhone 12 or earlier were able to buy an iPhone 13 at little or no cost. Although discount programs are still available, some offer less dramatic savings than when the new models were first released.

Unconvinced consumers

During Apple’s latest earnings call in October, CEO Tim Cook said demand for new products was “very robust” – fueled by interest in the latest iPhones, iPads and other devices – and that the company is on the way to a record holiday quarter. It had sales of $ 111.4 billion (about Rs 8.35,100 million) in the previous year.

He highlighted supply constraints as the company’s biggest challenge. Cook predicted that the struggle to get enough components, especially chips, would cost Apple more than $ 6 billion (about Rs 44,980 million) in revenue during the holiday quarter.

Constraints also hurt Apple partners. Sales for the company’s main chip supplier, Taiwan Semiconductor Manufacturing Co., fell recently, with October revenue falling 12% from the previous month to TWD 134.5 billion (about Rs 36,370 million).

Last month, Apple’s main iPhone assembler, Hon Hai Precision Industry Co., predicted that its business would shrink this quarter from a year earlier – due to declining consumer electronics and computers – as it continues to suffer from a shortage of chips. On October 24, IQE Plc saw its shares fall by 24% after warning that the demand for smartphones will decrease, although the semiconductor company did not name any specific customer.

And now there is more pressure on buyers’ pockets. US consumer prices rose last month at the fastest annual rate since 1990. Rising food, gas and housing costs are eroding purchasing power, despite higher wage growth.

Meanwhile, the iPhone 13 is not as difficult to obtain as it once was. Apple buyers in the US have been waiting for about a month for the price of the Pro model to be delivered. Now, waiting times have been reduced to two weeks or less.

– With the help of Vlad Savov and Mark Gurman.

© 2021 Bloomberg LP