TMTPost -- Apple Inc. can not rely on the most hyped artificial intelligence (AI) features to shore up sales of its flagship smartphone, one of top Apple analysts indicated Wednesday.
Credit：Ming-Chi Kuo
Apple has cut orders of iPhone 16 by around 10 million units for the fourth quarter of this year and the first half of next year, most of which will affect regular iPhone 16 rather than the Pro models, Ming-Chi Kuo, an analyst at TF International Securities who is well known for his accurate predictions on future Apple products, cited the latest industry survey in a post on Medium.
Based on the abovementioned cut, Kuo now estimated iPhone 16 production for the second half of the year to be 84 million units. The new estimate is around 4 million units less than Kuo’s previous forecast, suggesting a drop of 4.5%. Kuo’s estimates of the total iPhone production from the current quarter through the mid of next year were also lowered. The analyst said he now projects iPhone output for the fourth quarter of the year, the first quarter of 2025 and the second quarter of 2025 to be around 80 million, 45 million, and 39 million units, respectively, compared with around 84 million, 48 million, and 41 million the same period a year earlier. That represented the year-over-year (YoY) decline of 4.8%,6.3% and 7.3%, respectively.
Kuo also learned from the industry survey that the new generation of iPhone SE is expected to start mass production in December, and projected production of the more affordable iPhone model, which is said to be released the first half of 2025, is about 8.6 million units from December to the first quarter of next year.
As a result of iPhone SE 4 release and YoY decline in shipments, iPhone revenue is expected to come under pressure in the first half of 2025, and most iPhone suppliers will fell much more pressure in that period than late this quarter, according to Kuo. However, the analyst speculated iPhone revenue this quarter may not fully reflect the production cut since the gap between production and sell-through in the same quarter a year ago was larger, and the product mix now is more favorable, with increased production of the Pro Max model for the third quarter.
What’s more important, Kuo believes the recent cut signaled Apple Intelligence, Apple’s advanced personal AI system introduced at the Worldwide Developers Conference (WWDC) this year in June, will not materially boost iPhone shipments in the short term, which is set to disappoint some optimistic market participants.
“I believe that Apple is best positioned to succeed in on-device AI, and I am confident about the long-term potential for Apple Intelligence to become a popular paid service. However, significant growth in iPhone shipments will likely require further hardware innovation to accompany this AI development,” Kuo said in the blog Wednesday.
Apple introduced on September 9 the new iPhone 16 lineup, built from the ground up for Apple Intelligence, and is seeking to entice buyers with AI features that didn’t come along with iPhone 16 launch. The company released Wednesday new system iOS 18.2 beta, unlocking more AI features and ChatGPT Integration on iPhone 16 line for developers Wednesday. It was reported to roll out Apple Intelligence to the public with the iOS 18.1 next week, enabling the first set of AI tricks on devices includes Writing Tools, Mail and notifications summaries, a more natural and flexible Siri, the Clean Up tool in Photos.
Wall Street analysts including Kuo have raised concern over iPhone sales in September as they saw initial signs of weak sales from pre-orders. Kuo said that month Apple received about 37 million units of iPhone 16 series preorders at the first weekend of sales, decreasing around 12.7% from last yera’s iPhone 15 series first weekend sales.
Another sign of lower-than-expected demand Kuo noted is that the shipment increase before the preorder. The delivery times of the iPhone Pro series are significantly shorter than those of the previous premium version. The significant YoY growth in shipments before pre-order for iPhone 16 Pro Max is due to improved tetraprism camera production yields and Apple’s optimistic outlook for demand for this model, Kuo noted.
One of the key factors resulted in the lower-than-anticipated demand for iPhone 16 Pro series is that the major selling point, Apple Intelligence, is not available at launch alongside the iPhone 16 release, according to Kuo. He added intense competition in the Chinese market continues to impact iPhone demand. If Apple Intelligence releases in the four quarter of this year and peak season promotions have a limited effect on iPhone 16 shipments, Apple will implement more aggressive iPhone product strategies in 2025 to stimulate market demand, Kuo expected.
