Apple is asking suppliers to produce about 85 million units of the iPhone 15 this year, roughly in line with the year before, Bloomberg News said on Monday, citing people familiar with the matter. The report added that the company is aiming to hold shipments steady despite a projected decline in the overall smartphone market. It also said Apple is considering raising the price for Pro models, which would be the first increase in two years. Shares of the iPhone maker inched higher in trading before the bell.
Apple’s aims for stable unit shipments suggest that the company expects consumer demand for the iPhone to remain resilient, even amid rising global prices and supply chain disruptions in China. It may also be betting that even modest hardware upgrades will entice consumers to upgrade from older phones. Apple CEO Tim Cook suggested as much on a quarterly earnings call earlier this year: “I think we are seeing some extreme interest in high-end smartphones.”
The iPhone 15 series will include minor design, processor, and camera upgrades. In addition, the iPhone 15 Pro and 15 Pro Max models are set to feature a larger screen and new cameras with improved image quality. According to analysts, these features should entice consumers to upgrade from the previous generation of Apple’s large-screen phones.
According to The Information, Apple is becoming less confident that the iPhone 14 Plus, with a more prominent display, will appeal to consumers and has already asked at least one supplier to halt phone production. The company has also asked two other suppliers that rely on the iPhone 14 parts to lower production by 70% and 90%, respectively.
In the past, when Apple faced supply chain issues or weaker-than-expected consumer demand for its products, it lowered production targets to keep costs under control and boost revenue. For instance, during the COVID-19 pandemic and chip supply shortages in China last year, Apple lowered its production forecast from 90 million to about 85 million iPhones.
Nonetheless, investors should note that the iPhone 15 range was introduced in 2022 when global smartphone sales declined because of the Covid pandemic and geopolitical issues. So, it is unlikely that the upcoming upgrades will help to offset these trends.
According to a research report from Strategy Analytics, analysts expect the overall global smartphone market to shrink by 5% in 2023. That is because of rising competition from Chinese brands benefiting from the government’s efforts to promote local industries. On a brighter note, the average smartphone holding period has grown to over three years in most regions and four years in some countries, which should encourage consumers to upgrade their phones more regularly. This should buoy Apple’s ASPs and revenue, assuming the iPhone 15 series is successful. Moreover, the iPhone 15 Pro and Pro Max models are expected to offer more exclusive upgrades to attract buyers and boost Apple’s ASPs.
