We Have the Proof- Supply Chain Sources Can’t Tell How Well the iPhone Sells

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Since the third quarter of last year didn’t cast enough doubt on using sources in the supply chain to predict iPhone sales, maybe their latest abysmal failure will. We should be able to put it to bed now, and any analyst or tech writer worth their salt should, too. Tim Cook, the master of the supply chain, knows what he is doing, and the bought and paid for sources at Foxconn, Samsung, and other component makers don’t, at least when it comes to Apple’s iPhones sales.

I have to admit- they kind of had me this time. There was just so much negativity out there, even among more level-headed analysts. It seemed like the whole world knew what Tim Cook was going to have to admit- the iPhone X wasn’t selling as well as they expected and they had lost ground both quarter over quarter and year over year. Well, I have a feeling that Mr Cook thoroughly enjoyed telling the world that they were wrong.

Now, while I think that the vast majority of analysts tripped all over themselves on this one, Apple still didn’t set the world on fire. They just beat the really poor predictions. While sales did grow, they weren’t up much at only 3% year over year. Also, while the iPhone X may have been the number one selling iPhone model, the average sales price of all iPhones did dip enough to show sales have tapered off.

However, these numbers still mopped the floor with the negative expectations that many were spreading before the earnings call. Thanks to this, some of the before and after headlines from analysts and tech writers are pretty funny. A good example is Dan Frommer from Recode, who exclaimed that “Expectations could hardly be lower for Apple’s earnings today.” before the event. All he could muster after was an attempt to save face, claiming “R.I.P for real, iPhone X ‘super cycle.‘” Well, I guess that’s one extremely slanted way to look at it.

While the iPhone sales were just good, the overall picture for Apple was really solid. First off, while the average sales price of the iPhone is down over the previous quarter, it is still much higher than last year. Even though iPhone sales are flat, Apple is still making more money. And with the high satisfaction ratings the iPhone X has garnered recently, there is reason for a lot of optimism for less expensive iPhones with similar designs to the X.

That isn’t all, though. Apple’s growing diversification is starting to show up on the bottom line. Wearables, including the Apple Watch and AirPods, are up 50% year over year. At this point, Apple pretty much owns the category, and with the recent rumors that Apple is working on AR/VR glasses, we see that they aren’t standing still, either. Then there is Apple’s Service, which have also been on the rise over the last year. The $9.2 billion in revenue in that space represented 30% growth year over year.

Overall, Apple’s revenue was up a solid 16% over this quarter last year. The iPhone is still the main driver of profits, as it represents $52.2 billion out of the $61.1 billion in total Apple revenue. As such Apple still has plenty of room to branch out. However, this quarter shows that their two best pathways away from total dependency on the iPhone for revenue are moving in the right direction.

At the end of the day, the evidence is clear. Supply chain sources don’t know what is going on at Apple. As I alluded to earlier, Tim Cook is playing chess, the sources are playing checkers, and the analysts are somewhere around Go Fish. Will they finally learn their lessons this time around?


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