Apple analyst Ming-Chi Kuo expects Apple’s iPhone shipment numbers to drop by 10% to 36-40 million units in the first quarter of 2020, noting that the Coronavirus outbreak is having quite a grave impact on iPhone supply in China.
In a note to investors reported first by AppleInsider, Kuo’s newest survey shows that the Chinese market shipments alone dropped by between 50% to 60% YoY during the Chinese New Year holiday, which has resulted in a very high channel inventory.
“The smartphone shipments in the Chinese market was 360-380 million units in 2019,” writes Kuo. “We expect that shipments will decline by 15% YoY to 310-330 million units in 2020 (vs. 330-350 million units of market consensus) because of lower-than-expected replacement demand from 5G models and negative impacts on consumer confidence from the Coronavirus outbreak.”
Android smartphone makers, on the other hand, have a different problem at hand and that’s to do with fewer people willing to upgrade to 5G than expected. “We think that the primary reason for the lower-than-expected replacement demand is due to no innovative user experience being created by 5G,” writes Kuo. “Even the penetration rate of 5G smartphones grows due to replacing 4G models, while the overall market still shrinks, and it hurts the growth of brands and the supply chain.”
But, at present, the 5G demand issue is less relevant to Apple, and more to Android. Apple has specific problems in the region more associated with the Coronavirus, according to Kuo. “Now it’s difficult to predict the shipments in 2Q20 because of the uncertainties of the Coronavirus epidemic and consumer confidence,” he adds.
From what we know so far, major Apple supplier Foxconn has been increasing health monitoring in its plant in Wuhan. Meanwhile, Apple has closed all of its offices and retail stores in the country until February 9. It will continue to re-evaluate the situation as it develops.
