Apple took a big gamble with the iPhone 14 range: give the biggest upgrades to the Pro models to increase differentiation and hope pricing kept sales of standard models flowing. It hasn’t worked.
A growing number of industry reports now claim sales of iPhone 14 and iPhone 14 Plus models are below expectations. The latter, Apple’s first-ever affordable big-screen iPhone, is reportedly selling in lower volumes than the iPhone SE3 and iPhone 13 Mini. Apple canceled the Mini in favor of the Plus due to poor sales.
Further reports in the last 48 hours paint an even grimmer picture. Digitimes claims Apple’s supply chain partners have been ordered to cut iPhone 14 Plus production by 40%.
The Information goes even further, saying iPhone 14 Plus production has been temporarily halted “while its procurement team reevaluates demand for the product.” Its sources say two suppliers for the model were told to lower production by 70% and 90%, respectively.
Capping things off, influential Apple analyst Ming-Chi Kuo wrote on his blog, that sales of the iPhone 14 and iPhone 14 Plus are “bad,” concluding: “Apple’s product segmentation strategy for standard models fails this year.”
Pros Paper Over The Cracks
The saving grace for Apple so far has been sales of the iPhone 14 Pro and iPhone 14 Pro Max. Bloomberg describes sales of both models as “robust,” and Kuo reports that Apple has switched “production lines of the iPhone 14 to the iPhone 14 Pro models, which will help improve Apple’s product mix/iPhone ASP in 4Q22.”
The problem is this is unsustainable. Expanding on his iPhone 14 Plus sales article, The Information reporter Wayne Ma explained that “while at least one supplier also has been told to boost iPhone 14 Pro and Pro Max parts production, it’s insignificant when compared with the same amount of parts for units they are cutting for the iPhone 14 Plus.”
Things are unlikely to get better in the short term. Especially with Apple recently increasing iPhone prices in most countries — something that wasn’t covered widely due to price freezes in the US and China. But even these markets look set to pay more in 2023.
There is also a value problem here. In conjunction with rising prices, iPhone 14 trade-in prices are falling twice as fast as iPhone 13 models, which risks undermining the so-called ‘Apple Tax’ as a price worth paying. Throw in worldwide hyperinflation, spiraling energy prices, and a cost of living crisis in several key markets and relying on Pro models is a gamble.
Despite this, Apple still has plenty of time on its side. In a contracting market, Apple remains the only smartphone manufacturer with positive growth — at least for now. But iPhones are not alone. Questions are also being asked about the pricing and positioning of MacBook Air models and the entire iPad line-up.
Apple fans are notoriously loyal, but there are signs this loyalty is now being tested to breaking point. How Apple reacts will be telling.
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