TAIPEI (BLOOMBERG) – Apple has asked suppliers to build at least as many of its next-generation iPhones this year as in 2021, counting on an affluent clientele and dwindling competition to weather a global electronics downturn.
The technology giant is telling its assemblers to make 90 million of its newest devices, on a par with last year, despite deteriorating projections for the smartphone market, according to people with knowledge of the matter.
The company still expects to assemble roughly 220 million iPhones in total for 2022, also about level with last year, according to one of the people.
Apple’s projections, a closely guarded secret, suggest that it is confident about weathering a slump in spending on smartphones and other devices. Mobile device makers have begun freezing orders, China’s largest chipmaker warned on Friday (Aug 12). The global handset market, which slid 9 per cent in the June quarter, is expected to shrink 3.5 per cent in 2022, research and consultancy firm IDC has forecast.
Shares of Apple suppliers in Asia rose on the news. Taiwanese iPhone assembler Pegatron jumped as much as 3.6 per cent in its biggest gain in five weeks, while Japan Display logged its biggest two-month rise of 5 per cent. TDK rose as much as 5.3 per cent and Murata Manufacturing gained 3.7 per cent.
At a time when Android devices are suffering, the stronger demand for Apple’s new line-up stems from a customer base still willing to spend on premium gadgets, the people said. The virtual demise of Huawei Technologies has also eroded competition in high-end smartphones.
Hon Hai Precision Industry, which puts together most of the world’s iPhones, hinted at Apple’s resilience when it said this week that sales of its smart consumer electronics products should be little changed in 2022.
The world’s most valuable company has promised to be disciplined about spending as economic and geopolitical uncertainties cloud the outlook for 2022 and beyond. Bloomberg reported last month that Apple would slow spending and hiring across some of its teams in 2023.
This week, a cooler-than-anticipated United States inflation reading buoyed hopes that interest rate hikes will not be as aggressive as thought. But market observers cautioned that the economic outlook remained bleak.
Bloomberg Intelligence analyst Anurag Rana said: “Apple’s near- and mid-term percentage sales growth will likely remain in the mid-single digits… Spiking inflation, war in Europe and lingering Covid-19 restrictions in China could elongate the product refresh cycle, hurting fiscal 2022 sales growth by 2 per cent to 3 per cent versus consensus of US$394 billion (S$539.6 billion).
“Apple’s overexposure to China for manufacturing is a major concern, and any disruptions due to either parts shortages or geopolitical issues could seriously hinder its ability to fulfil demand.”
Still, Apple is soldiering ahead with plans for its marquee device, which accounts for about half of its revenue and is the main gateway to profitable services.
Apple is set to launch four new iPhone models that it hopes will break more ground than 2021 versions, Bloomberg News has reported. The iPhone 14 Pro models are expected to include a much-improved front-facing camera, a new rear-camera system that includes a 48-megapixel sensor, thinner bezels and a faster A16 chip, among other features.
Before 2021, Apple had maintained a consistent level in recent years of roughly 75 million units for the initial run of a new device until the end of the year. It upgraded its target for 2021 to 90 million.