Still Slumping iPhone Sales Expected To Pressure Suppliers In 2017

The new predictions from KGI’s Ming-Chi Kuo are out — and less than bullish on Apple.

The latest iPhone sales forecast predicts that overall, iPhone 7 lines will be down in 2017 — pushed mainly by weak demand in China, slow shipment volume of 4.7″ iPhones in 1Q17, and the lack of a new iPhone SE in 2Q17.

“We are conservative about the sell-through of the 4.7” iPhone and Apple’s market share in China. As such, we estimate 1Q17 iPhone shipment volume of 40-50mn units, lower than the 51.2mn units in 1Q16,” Kuo wrote.

“Shipment volume in 2Q16 came in higher than expected thanks to upbeat demand for the iPhone SE. However, in order to keep gross margin at a high level and to avoid cannibalization of high-end models, we do not expect Apple to launch an upgraded iPhone SE in 2Q17. Without contribution from a new model, we forecast total iPhone shipment volume will reach 35-40mn units and fall YoY in 2Q17, lower than the 40.4mn units in 2Q16.”

Apple does not like to make less money, however, which means Apple suppliers may soon see some of the pressure of falling iPhone sales shifted onto them.

For those with weak bargaining power, Kuo writes, an inevitable price cut is coming.  He also writes that that “most iPhone suppliers fall into this category.”

“However, a select few suppliers that have stronger bargaining power with Apple may even be able to raise prices. Take Samsung (KR) for example, the company is the main supplier of 3GB DRAM and 3D NAND flash. As DRAM and NAND flash will likely remain in short supply in 1Q17F, we believe Samsung is unlikely to surrender to the pressure, and may even raise its product prices.”

Kuo also notes that the price of TSMC will not be affected by Apple’s pricing pressure as its production capacity was pre-booked, meaning it would be outrageously expensive for Apple to switch suppliers for that good.

The KGI analyst also noted that by the end of 2017, Apple may still likely be holding a game changer in the form of the iPhone 8.

“iPhone 8 or whatever iPhone Apple releases next Fall will likely be a big release following the 3 years of relatively similar iPhone updates, and many expect it to push Apple back into growing iPhone sales once again.”