Ming-Chi Kuo Says ‘Worst Soon Over’ in Regards to Slowing iPhone Sales

Earlier this month, Apple lowered its revenue guidance for the first quarter of the 2019 fiscal year by up to $9 billion due to fewer iPhone upgrades than it anticipated, particularly in the Greater China region.


Apple analyst Ming-Chi Kuo, however, believes the "worst" will be "soon over" in regards to the slowdown. In his latest research note with TF International Securities, obtained by MacRumors, Kuo opined that the "share prices of Apple and most iPhone suppliers are generally priced in the negative."
Our report published on December 14, 2018, was the first to cut the estimation of 2019 iPhone shipments to 190mn units or less; the current market consensus on 2019 iPhone shipments (160–180mn units) is much lower than our estimation and we believe the share prices of Apple and most iPhone suppliers are generally priced in the negative.

We maintain our forecast of 188–192mn units for 2019 iPhone shipments. We believe the downside risks of share prices for the Apple and iPhone supply chain are limited in the near term given that 2Q19 iPhone shipments will likely be better than the market consensus.
Kuo has slightly cut his estimate for iPhone shipments in the first quarter of 2019 from 38–42 million units to 36–38 million units because the "demand for new models in China and emerging markets is lower than expected," but he believes the decline will begin to ease starting in the second quarter.

Specifically, he estimates iPhone shipments in the second quarter of 2019 will reach 34–37 million units, slightly higher than the market consensus of 30–35 million units. That would still be a roughly 14 percent decline on a year-over-year basis, but far better than an estimated 29 percent drop in the first quarter.

As long as the US-China trade war does not worsen, Kuo expects the improvement to continue into the second half of 2019, with iPhone shipments likely to be generally flat compared to the second half of 2018 thanks to stronger replacement demand, trade-in programs, and market share gain in European markets.

Kuo maintains his forecast of 188–192 million iPhone shipments in 2019.

Related Roundups: iPhone XS, iPhone XR

This article, "Ming-Chi Kuo Says 'Worst Soon Over' in Regards to Slowing iPhone Sales" first appeared on MacRumors.com

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Ming-Chi Kuo Says iPhone XR Demand Has Been Lower Than Expected, Slashes Shipment Estimates

iPhone XR demand has been lower than expected, according to Apple analyst Ming-Chi Kuo, who has slashed his overall iPhone shipment forecast by 20 percent for the first quarter of 2019. He now expects Apple to move 38-42 million iPhones in the quarter, down from his original estimate of 47-52 million.


Kuo, in a research note with TF International Securities, obtained by MacRumors:
We have reduced our 1Q19 iPhone shipment estimation by 20% to 38–42mn units (vs. our previous forecast of 47–52mn): We cut the 1Q19 iPhone shipment estimation again for the following reasons. (1) Lower-than-expected XR demand. We have reduced our 1Q19 XR shipment estimation to 15–20mn units vs. our previous forecast of 20–25mn units. (2) The increase in orders of legacy iPhone models cannot offset the decline of XR and XS series shipments because of the low season impact.
Apple reported sales of 52.2 million iPhones in the first quarter of 2018, which corresponds with the second quarter of Apple's fiscal year, so as few as 38 million units in the first quarter of 2019 would be a significant year-over-year decline.

For the iPhone XR in particular, Kuo has revised his shipment estimate to 15-20 million for the first quarter, down from 20-25 million.

Kuo estimates annual iPhone shipments will fall between 205 million and 210 million in 2018, and based on that, forecasts that annual iPhone shipments in 2019 will decline up to 10 percent to a range of 188 million to 194 million. This would fall below Wall Street's consensus estimate of around 212 million units in 2019.

While this news paints a pessimistic outlook for the iPhone, declining unit sales will likely be at least partially offset by the rising average selling price of iPhones. Apple's latest iPhone lineup is its most expensive yet, with the $349 iPhone SE discontinued and the iPhone XS Max topping out at $1,449 with 512GB of storage.

Kuo:
We believe that the iPhone ASP could at least keep growing YoY until 3Q19, and it will offset the YoY shipment decline. However, most suppliers will face growth challenges due to iPhone shipment decline. We believe that specific suppliers can grow, thanks to the component price increase or the ability to obtain new orders, but the visibility of the beneficiary list will not be clear until 1Q19 because some spec and order allocations of 2H19 new iPhone models are not confirmed yet.
Apple will no longer be disclosing unit sales in its quarterly earnings reports going forward, so investors will have to look towards iPhone revenue to determine how well the handset is selling. If unit sales are particularly bad, then a rising average selling price might not be enough to hide the weakness.

Apple has been aggressively marketing its latest iPhones. On its website, for example, the iPhone XR and iPhone XS take up the entire homepage with advertised starting prices of $449 and $699 respectively. However, each have an asterisk that leads to fine print that says pricing is based on an iPhone 7 Plus trade-in.


Apple's earnings results for the first quarter of 2019 will likely be released in May, so we're still some time away from real numbers.

Related Roundup: iPhone XR
Buyer's Guide: iPhone XR (Buy Now)

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Kuo: iPhone XR Pre-Order Demand Over First Weekend Exceeded That of iPhone 8 and iPhone 8 Plus

iPhone XR pre-order demand in the first three days of the device's availability was "better than that" of the iPhone 8 and iPhone 8 Plus during the same period last year, according to Apple analyst Ming-Chi Kuo.


In a research note obtained by MacRumors, Kuo said that although pre-order demand immediately after launch has been lower for the iPhone XR versus the flagship iPhone XS models, overall iPhone XR shipment momentum is "more stable" because it will drive more customers to upgrade than the iPhone 8 series over time.


Kuo added that iPhone XR shipping estimates on Apple.com (many models remain available for launch day delivery on Friday) do not indicate exact demand, as the type of customers interested in the device are more general users, with many ordering through carriers to take advantage of promotions.

More details to follow…

Related Roundups: iPhone 8, iPhone XR
Buyer's Guide: iPhone XR (Buy Now)

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Kuo: Apple Has Opportunity With iPhone XR in China as Chinese Rivals Face ‘Lower Than Expected’ Demand

In a research note obtained by MacRumors, Apple analyst Ming-Chi Kuo said cumulative smartphone shipments from four major brands on the Chinese market, including Huawei, Oppo, Vivo, and Xiaomi, declined 10 percent on a year-over-year basis during China's Golden Week, a national holiday and major sales period.

iPhone XR in (PRODUCT)RED

Kuo, writing on behalf of research firm TF International Securities, said the estimated 6.5-7 million shipments during Golden Week were "lower than expected." He called Huawei the "major winner" as the only brand with a year-over-year increase in shipments during the October 1-7 holiday.

The well-known analyst attributed the year-over-year decline to a lack of innovative selling points among Chinese-brand smartphones. Kuo is positive on the trends of triple-lens cameras and fingerprint sensors under the display in smartphones, but said only limited models currently support both functions.

Kuo also cautioned that the US-China trade war "may be affecting consumer confidence, which makes the replacement cycle longer."

A third reason is that some consumers—particularly existing iPhone owners—will opt for more affordable legacy iPhone models or wait for the iPhone XR, according to Kuo, who expects replacement demands for the iPhone XR in China will be better than last year's demand for the iPhone 8 and iPhone 8 Plus.

Extrapolating from Golden Week, Kuo said smartphone shipments in China in 2018 as a whole may be "lower than expected." He estimates shipments may decline 10-15 percent to 410 million units on a year-over-year basis.

Chinese brands have to rely on overseas markets for further growth, according to the research note, shared with investors Thursday. Kuo remains confident about Huawei's future shipment momentum because the brand has "the best competitiveness among Chinese brands in overseas markets," the note said.

As for Apple, the iPhone XR represents an opportunity for the company to increase its market share and revenue in the Greater China region, where it has faced increasing competition from the likes of Huawei, Oppo, Vivo, and Xiaomi.

With a lower starting price of $749 in the United States, the iPhone XR lacks some of the bells and whistles of the flagship iPhone XS and iPhone XS Max, including an OLED display and glass rear casing, but it has many identical tech specs and longer battery life than both of the more expensive models.

iPhone XR pre-orders begin Friday, October 19 in more than 50 countries, followed by in-store availability on Friday, October 26.

Related Roundup: iPhone XR
Buyer's Guide: iPhone XR (Caution)

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Kuo: iPhone XS Max Significantly Outselling iPhone XS, 256GB Most Popular, 512GB Subject to Serious Shortage

In a research note obtained by MacRumors today, Apple analyst Ming-Chi Kuo has provided updated launch-weekend takeaways for the iPhone XS, iPhone XS Max, and Apple Watch Series 4, all of which went on sale Friday.


Kuo says that iPhone XS Max demand is "better than expected," with the 6.5-inch model outselling the iPhone XS by three to four times. He says the 256GB storage option is most popular, with the 512GB configuration subject to a "serious shortage" due to Samsung being the only reliable supplier.
We have determined that the demand for XS Max is better than expected (3–4 times that of XS). The gold and space-grey colors are significantly more popular than the silver. 256GB is the most popular, and 512GB is subject to a serious shortage because only Samsung can currently ship NAND Flash well. We are positive that XS Max shipments will grow steadily in 4Q18 thanks to demand from Asia market and the gift season.
Kuo adds that Apple Watch Series 4 demand is "much better than expected," with supplies likely to remain tight until Compal begins mass production starting from November, as a secondary supplier alongside Quanta.
Apple Watch Series 4 demand is much better than expected. The capacity of the assembler Quanta is full already; therefore, the supply cannot improve significantly until second supplier Compal's mass production for Apple Watch Series 4 starting from November. We have increased the Apple Watch shipment forecast in 2018 from 18mn to 18.5–19.5mn units.
More details to follow…

Related Roundup: iPhone XS

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Kuo: Apple Watch Series 4 Pre-Orders Above Expectations, iPhone XS Seeing Lackluster Demand

Apple analyst Ming-Chi Kuo has issued a research note today, obtained by MacRumors, outlining his opinions about first-weekend pre-orders for the iPhone XS, iPhone XS Max, and Apple Watch Series 4.


Kuo says Apple Watch Series 4 pre-orders have been "better than expected," as a result of new innovative functions, such as electrocardiogram support. He predicts Apple Watch shipments will reach 18 million units in 2018, with the Series 4 lineup accounting for 50 to 55 percent of those orders.

If the ECG support expands to more countries, Kuo believes the Series 4 lineup could see even stronger shipment momentum.

In contrast, Kuo says iPhone XS pre-orders are "lower-than-expected," as customers opt for the iPhone XS Max or wait for the iPhone XR. Kuo has lowered his forecast for iPhone XS orders, believing the model will account for only 10 to 15 percent of shipments of the new 2018 iPhones, down from 15 to 20 percent.

Kuo says iPhone XS Max pre-orders have been in line with expectations, signifying the success of Apple's high-pricing strategy:
There is strong Chinese demand thanks to the gold casing, dual-SIM, and large display. The XS Max average shipping time is shorter than the 2H17 iPhone X (1–2 weeks vs. 2–3 weeks), which we think is due to supply improvements. We maintain our forecasts that the XS Max will account for 25–30% of 2H18 new iPhone model shipments.
Kuo sees a positive outlook for the iPhone XR, available to pre-order October 19, given its lower pricing and dual-SIM support in China.

The well-known analyst increased his forecast for iPhone XR orders, estimating that the model will account for 55 to 60 percent of shipments of the new 2018 iPhones, up from 50 to 55 percent previously.

"We estimate the shipment peak of XS Max and XS will be in October and XR will start shipping and benefiting supply chain momentum in October," said Kuo.

iPhone XS, iPhone XS Max, and Apple Watch Series 4 pre-orders began Friday.


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Kuo: USB-C on 2018 iPad Pro, Touch ID on 2018 MacBook, EKG and Ceramic Backs on All Apple Watch Series 4 Models, More

Apple analyst Ming-Chi Kuo has issued a new research note today, obtained by MacRumors, that outlines several predictions about Apple's upcoming products, including new iPhone, iPad Pro, Apple Watch, and MacBook models.


Kuo expects Apple to replace Lightning with a USB-C interface on 2018 iPad Pro models, with an 18W power adapter in the box. That sure sounds like the next iPad Pro will have a USB-C port, instead of a Lightning connector, but the wording is somewhat ambiguous, so he could be referring to a USB-C charger.
In addition to Face ID support, we expect the new iPad Pro models' main upgrade to include replacing Lightning with a USB-C interface and bundling with a new unibody design 18W power adapter, which cancels the removable plug design…
Kuo adds that 2018 iPhone models will retain the Lightning connector and remain bundled with a 5W power adapter, not the widely rumored 18W power adapter with a USB-C port, which could be for 2018 iPad Pro models after all.

His research note with TF International Securities adds that Apple's widely anticipated lower-priced MacBook may replace the current 12-inch MacBook. Again, the wording is somewhat ambiguous, so it's unclear if Kuo means the 12-inch MacBook will be refreshed, or if it will be entirely replaced.

Kuo expects the new lower-priced MacBook to support Touch ID fingerprint authentication, but without a full-out Touch Bar, which remains exclusive to select 13- and 15-inch models of the 2016 and later MacBook Pro:
The new low-price MacBook may replace the position of the current 12" MacBook. We expect this new model to support the Touch ID but it will not have the Touch Bar. Everwin Precision is the main beneficiary because it is the first time this company will enter the Mac casing supply chain and its shipments account for 20% of the new MacBook model's D parts.
As far as the Apple Watch Series 4 lineup is concerned, Kuo believes all models will feature ceramic rear casing, rather than aluminum or stainless steel, whereas just the high-end Edition model is ceramic in the Series 3 lineup. He also believes all Series 4 models will have electrocardiography (ECG or EKG) functionality.
The new Apple Watch models will have narrower bezels, support electrocardiography (ECG), and all be equipped with ceramic backs (currently, some models are equipped with composite backs). We believe the new Apple Watch models will attract more users on supporting ECG. The ECG supplier is Osram (LED design)…
Kuo also said production of the rumored 6.1-inch iPhone with an LCD has been postponed to late September to early October due to quality issues with the assembly and display, echoing a report from Mark Gurman earlier today.

Last, Kuo still expects Apple's long-awaited AirPower charging mat and new AirPods to be released by the end of the year.


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Samsung Expected to Match 2018 iPhone Sizes With Galaxy S10 Lineup

Apple is widely rumored to introduce a trio of new iPhones in September, including a second-generation 5.8-inch iPhone X, a larger 6.46-inch version dubbed iPhone X Plus, and a 6.1-inch model with only some iPhone X features.

Galaxy S9

Perhaps inspired by those plans, respected analyst Ming-Chi Kuo claims that Samsung will follow suit with its Galaxy S10 lineup next year, including 5.8-inch, 6.1-inch, and 6.4-inch models. Kuo outlined his predictions in his latest research note with TF International Securities, seen by Business Insider.

Kuo notes that the 6.1-inch and 6.4-inch models will be equipped with an ultrasonic fingerprint scanner built into the display, a feature that Apple decided against on the iPhone X. The technology will also be built into the Galaxy Note 10 later in 2019, according to his research note.

Kuo's prediction will surely reignite a long-standing debate about Samsung copying Apple, just weeks after the two companies settled a seven-year-long lawsuit in which Samsung was found guilty of copying the iPhone's design.

Korean website The Bell previously reported that one of the Galaxy S10 models will be a lower-cost option, in line with the rumored 6.1-inch iPhone, which is expected to have some iPhone X features like Face ID, and an edge-to-edge display with a notch, but lack others, like an OLED display.

The lower-cost Galaxy S10 will also have tradeoffs, such as a fingerprint scanner built into the edge of the device, according to Kuo.

The Bell also said the Galaxy S10+ will feature five camera lenses: three on the back, and two on the front. The rear system is said to include the same 12-megapixel wide-angle lens and 12-megapixel telephoto lens as the Galaxy S9+, plus an all-new 16-megapixel 120º ultra-wide-angle lens.

Apple is also rumored to introduce at least one new iPhone with a triple-lens rear camera in 2019, but likely not until September, which would likely be after the first triple-lens Galaxy S10 is released, so it's not always Samsung following second. Huawei was first to release a triple-lens smartphone regardless.

Samsung is also said to be considering adding 3D facial recognition to the Galaxy S9 lineup, in line with Face ID on the iPhone X. Galaxy S8 and Galaxy S9 models already feature facial recognition, but it is 2D, and tests proved that the systems could be spoofed with a photo of a face.

One feature that Samsung has yet to copy, unlike several other Android smartphone makers, is the iPhone X's notch. Galaxy S9 models still have slim, uniform bezels along the top and bottom of the display, although Samsung has patented a notched smartphone design, and could use it eventually.

As usual, Samsung will likely unveil its Galaxy S10 lineup at Mobile World Congress in February 2019, with availability in March.

Related Roundup: 2018 iPhones

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Ming-Chi Kuo Says 2018 iPhone Lineup Will Have New Colors, Including Gold, Red, Blue, and Orange

Apple is widely rumored to release a trio of new iPhones in 2018, including a second-generation iPhone X, a larger 6.5-inch version dubbed the iPhone X Plus, and an all-new 6.1-inch model with some iPhone X features, but not all, at a lower price point of around $600 to $700 in the United States.


While the current iPhone X is limited to Space Gray and Silver, well-connected Apple analyst Ming-Chi Kuo believes at least two of the new iPhone models in the 2018 lineup will be available in additional colors.

In a research note with TF Securities, obtained by MacRumors, Kuo said the second-generation iPhone X will be available in Black, White, and Gold, while the 6.1-inch model is said to come in a wide array of colors, including red, blue, orange, gray, and white. An excerpt from the note follows.
We expect the demands for the new 6.5" OLED iPhone will be better than iPhone X because of similar or lower price but with larger display, dual-sim dual-standby (DSDS), and three possible casing colors (black, white, and gold).

The new 6.1" LCD iPhone is expected to boost better-replacement demands than iPhone 8/8s did due to being equipped with full-screen, Face ID, selling price lower than $700 USD, DSDS and five possible casing colors (grey, white, blue, red, and orange).
The current iPhone X was already expected to come in gold, but Kuo previously said Apple faced manufacturing challenges with the color, likely related to difficulties anodizing the stainless steel frame to be gold.

We know that Apple did at least prototype a gold iPhone X, as seen in regulatory photos it was required to submit to the FCC prior to the device launching last year. The photos were filed in September 2017, but weren't visible until April 2018, when Apple's confidentiality period expired.



It's reasonable to assume that Apple has figured out how to mass produce the iPhone X in gold, so there is little reason to doubt this rumor.

In terms of the lower-priced 6.1-inch iPhone, it also makes sense that it could be available in a rainbow of colors like one of its lower-priced siblings of the past, the plastic-backed iPhone 5c. The red finish would likely be part of the (PRODUCT)RED initiative supporting the elimination of HIV/AIDS.

Kuo has a respectable track record in terms of outlining Apple's future plans. This is his third Apple-focused research note with TF Securities, where he began working earlier this year after a long stint at KGI Securities.

Update: Steve Hemmerstoffer, who runs the Twitter account OnLeaks, claims Apple is also currently prototyping 2018 iPhones with yellow and pink finishes. He also says the "black" that Kuo refers to is likely Space Gray:


Related Roundup: 2018 iPhones

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Kuo Details 2018, 2019 iPhones, Expects Cheaper MacBook Air, Face ID iPads, and Larger-Screen Apple Watches Later This Year

Apple analyst Ming-Chi Kuo, who now works at research firm TF International Securities, has issued a new research note today with a wealth of information about Apple's upcoming products and the company's overall outlook.


Highlights from the research note, obtained by MacRumors:
  • Kuo believes 2019 iPhones will have "marked innovations," but notes it could take until September or October of this year at the earliest until the exact designs and features become clearer.
  • Nevertheless, among new iPhones introduced in 2019, Kuo expects shipments of LCD-based models to outpace models with OLED displays. He also notes that, if any 2019 iPhones have triple-lens rear cameras, it would unsurprisingly benefit camera-related companies in Apple's supply chain.
  • In the second half of 2018, Kuo still expects the releases of new iPad models equipped with Face ID, a new lower-price MacBook Air, and new Apple Watch models equipped with larger displays.
  • Kuo also still expects three new iPhones in 2018: a second-generation iPhone X, a larger 6.5-inch version dubbed the iPhone X Plus, and a 6.1-inch version that will essentially be a budget iPhone X.
  • Kuo expects the 6.1-inch iPhone to be available in stores in September of this year, despite entering mass production later than the second-generation iPhone X and so-called iPhone X Plus. This means all three new iPhones in 2018 will be both announced and released in September.
  • Kuo believes the 6.1-inch iPhone will incentivize customers with older iPhones to upgrade due to it being equipped with similar features as the iPhone X and at a more competitive price of $600 to $700 in the United States.
  • Kuo on potential impact on Apple of the trade war between the United States and China: "We believe it is unlikely that Apple will be directly impacted by the trade war because it plays an important role in both China and US economy. It is worth monitoring whether Chinese consumers will reject buying Apple's products due to anti-American sentiment."
  • Kuo on how Apple can grow under fiercer competition: "In the high-end market, Apple's real competitor is itself, which implies that it needs to offer new models that appeal to consumers to boost replacement demands. We attribute the iPhone's slow growth in recent years to there being no significant replacement demands boosted by new models after the iPhone 6."
  • Kuo on Apple's innovation: "We believe that Apple is still the leading company in the consumer electronics sector and has surpassed its competitors by a wide margin in terms of innovative user experience and ecosystem development. The leading advantages will benefit it when innovating with new applications," like augmented reality.
Much of this reiterates Kuo's previous predictions and information shared by Bloomberg's Mark Gurman over the past several months.


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