Apple's suppliers give clues that it will be a difficult quarter for the Cupertino giant, as there are signs that people are not buying the iPhone X.
The golden age of the iPhone may have officially reached its end. And Apple can blame the iPhone X for it .
This fiscal year was supposed to be a success for Apple. The company redesigned its popular iPhone for the first time in three years, and presumed that the iPhone X is "the future" of the mobile segment. Analysts said the device was going to boost a "supercycle" that would inject new vigor into the stagnating cell phone market.
But it seems that many people are not ready for the future, or at least to pay a high sum for that future.
The 5.8-inch iPhone X has an initial price of US $ 999, or US $ 300 more than the iPhone 8 of 4.7 inches and US $ 200 more than the iPhone 8 Plus of 5.5 inches . For those extra hundred dollars, you get a bigger and sharper screen in a smaller body, Face ID to unlock the device with your face and the ability to send animated emojis.
Those changes, however, are not enough to encourage consumers to disburse that money, and concerns that the mobile market continues to fall after its first year in history when it shows a decline. The downside highlights the industry's dilemma: it is becoming more difficult for phone manufacturers to make revolutionary changes to their devices, and the prices of new flagship phones are growing at the same time that US telephone operators are falling apart of the subsidies. That means that consumers are keeping their old devices for longer than before.
And Apple is not immune to it.
The company will give its financial report for the second fiscal quarter this Tuesday. The results will alleviate or confirm fears that the golden age of the iPhone has passed.
In the past few weeks, suppliers such as Samsung, TSMC and SK Hynix have warned of low demand - which is presumed to be due to Apple - and reports have said that the Cupertino giant has reduced its production plans for the iPhone X. Many analysts have been reducing their expectations of iPhone sales in the quarters ending in March and June. Some even predict that iPhone sales could fall for the entire year.
In total, analysts believe that Apple sold 54 million iPhone units in the quarter that ended in March, compared to 50.8 million a year ago. Although this represents a rise, it is not the explosive growth that many had expected.
Before the financial results report, Wall Street "has entered into panic mode," said analyst Daniel Ives of GBH Insights.
Apple shares have fallen 8 percent in the last two months. The value of the stock closed on Thursday at US $ 164.22.
Apple suppliers give bad signals
The biggest warning signal of Apple's results is what the suppliers have reported. And it's not good.
TSMC, the Taiwanese company that makes chips that are integrated into the iPhone and iPad, warned last week that its second quarter will be worse than expected due to the "continued low demand of our mobile sector."
Another key supplier, South Korean memory chip maker SK Hynix, said the sale of chips for phones is slowing down. And AMS, an Austrian company that makes optical and 3D sensors for phones, said it is experiencing weak orders from one of its main customers, which analysts believe is Apple.
Then on Wednesday, Samsung, which supplies the iPhone's OLED screen, said its revenue in its screen division was affected by the slow demand for its flexible OLED panels and more competition between rigid OLED panels and OLED displays. Flexible OLED displays allow phone manufacturers to bend the screens of their devices, such as the iPhone X and the Galaxy S9. Samsung warned that demand will remain weak for OLED screens in the second quarter.
Samsung said its own mobile unit will have difficulties in the quarter ending in June.
But perhaps a major concern is Apple's forecast for the quarter ending in June. Analysts expect revenues of US $ 52 billion, an increase of US $ 45,400 million last year, according to a survey by Yahoo Finance. But some say Apple may not achieve this projection.
Increasing services
Apple generates two thirds of its income from the iPhone. If this segment of the market suffers, then so will Apple's financial results.
The company does not have any other business division that approaches the size of the iPhone. However, the company is expanding to new areas such as audio with its HomePod and is driving the iPad in the education sector . But, as for the first quarter, only 9.6 percent of its sales came from its services, while 70 percent came from the iPhone.
Even so, Katy Huberty, an analyst at Morgan Stanley, stressed that services "are becoming the main engine of growth" for Apple. Although they represent a small part of overall revenues, sales in services have been growing in double-digit percentages. In the first quarter, they went up 18 percent.
And, despite a favorable tax law, Apple's revenue may fall this fiscal year and next, said Toni Sacconaghi, an analyst at Bernstein.
"What's more, we believe that the narrative among investors after the financial results report will be dominated by the question of whether the iPhone's business can grow over time," he said.
Apple could find the way again. But this could not be due to iPhone X.
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