Consumer Electronics

Will 96 Million iPhones Be Enough?

According to a report in Nikkei Asia Tuesday, Apple Inc. (NASDAQ: AAPL) plans to produce as many as 96 million iPhones in the first half of 2021, a year-over-year increase of nearly 30%. For all of next year, Apple has drawn up a preliminary forecast for 230 million iPhones, an increase of 20% compared with production in 2019 and near its record production of 231.5 million iPhones in 2015.

The production forecast for the first half of the year includes iPhone 12, iPhone 11 and iPhone SE, according to Nikkei’s sources. One supplier told Nikkei that demand for the iPhone 12 Pro and Pro Max models were “especially stronger than we estimated.” Demand for the basic iPhone 12 is in line with the supplier’s own forecast, while demand for the iPhone 12 mini is “a bit sluggish.”

Apple’s introduction of its 5G-compatible iPhones has boosted sales in the first nine months of the year. Shipments total around 116 million iPhones, down just 1% year over year, according to IDC.

Demand for new smartphones is so strong that manufacturers face significant component shortages. China-based Xiaomi has ordered parts for 240 million smartphones next year. U.S. sanctions against Huawei have resulted in a major offensive to fill the holes left behind by the crippled Chinese firm.

In Apple’s case, its supply of the iPhone 12’s A14 chip appears to be solid, but one industry source told Nikkei that Apple is “still chasing other needed components.” Another issue might be a letdown after the big 5G introduction this year.

Analyst Jeff Pu of GF Securities told Nikkei that he doesn’t “see the excitement” for a new iPhone in 2021 as there was for Apple’s first 5G phone that came out this year.

And sales of smartphones will have some ground to make up going forward. After lower smartphone shipments in 2019, this year was supposed to begin a recovery. The COVID-19 pandemic put an end to those hopes. IDC has forecast that 2020 shipments will fall by 9.5% year over year in 2020 to 1.2 billion units worldwide.

About 1 billion of this year’s production will be 4G-compatible phones, while IDC’s forecast for next year calls for production of around 825 million 4G phones and 450 million 5G phones. By 2023, IDC forecasts that 5G devices will account for more than 50% of all smartphones shipped.

The good news for consumers is that the average selling price for 5G phones dropped from more than $800 to around $625 and will continue to decline through 2025, although more slowly. By 2025, IDC sees an average selling price for a 5G phone of around $500.

Apple stock traded up more than 3% Tuesday morning to $125.73, in a 52-week range of $53.15 to $137.98. The stock’s price target is $126.24.