Apple warns of iPhone supply crunch
Apple announced that the primary factory in charge of the latest iPhone 14 Pro and Pro Max models in Zhengzhou, China is operating at reduced capacity due to the latest COVID-19 restrictions in the region. As a result, Apple believes it will not be able to meet the strong demand for the new iPhone 14 Pro and iPhone 14 Pro Max models due to lower shipments and is warning of longer customer wait times for the new iPhones.
The NPD Take:
- Supply shortages on Apple products has been a juicy tech topic since the beginning of the pandemic in early 2020. Supply was especially scarce in Q4 2021 due to the exploding demand on all kinds of products, including the latest iPhones, but we then saw a major narrative shift with retailers warning of inventory surpluses. We had been predicting that iPhones would be an exception given the anticipated strong demand driven by carrier subsidies and projected a strong quarter for Apple. Almost all iPhone 14 Pro and Pro Max orders (except the expensive 1TB version depending on the carrier) at carriers show a delivery period of mid- to late-December. Unless the supply situation rapidly improves, many iPhone users will have to wait till after the holidays to get their hands on the new shiny upgrade.
- The limited supply of the iPhone 14 Pro models may lure impatient and price sensitive customers to downgrade to the iPhone 14 and 14 Plus models. A downgrade to the 14 Plus would be the ideal scenario for Apple as this large screen variant was not able to attract many iPhone enthusiasts.
- Apple’s supply shortage on the popular Pro models will hinder postpaid carriers’ Q4 objectives as the heavy promotional activity on these models has been an important driver for churn. Assuming none of the carriers will be prioritized by Apple for inventory replenishment, churn may stay lower than in the previous years. The reduced pressure for subsidy (due to lack of supply) should also help carriers’ bottom lines for the quarter.
- Lack of supply typically equates to opportunity for rivals to come in and fill in the void, but this theory fails in the case with the iPhones, especially the expensive Pro versions on postpaid accounts. Ninety-six percent of postpaid iPhone users buy another iPhone when it is time to replace their phone, thus chances of a migration to an Android alternative are highly slim.
Crickets joins the test drive game
AT&T’s main prepaid service Cricket Wireless recently announced the availability of a new application dubbed “tryCricket” that gives interested customers a trial of Cricket’s wireless service free of charge for 14 days. Customers who download the app to their phone will be provided a temporary phone number with 3GB of cellular data with unlimited talk and text for 14 days. Notably, users are required to have an unlocked phone to try the service; those users whose phones support eSIM activations will be able to try the service immediately, while those who require a physical SIM can order a free one via the application.
The NPD Take:
- eSIM-based activations continue to increase in popularity as the latest iPhone 14 series’ eSIM-only activation model has fostered carriers accelerate the provisioning of the service. Today, most of the new mid-tier and upper segment phones support eSIM-based dual SIMs, and according to the latest NPD Connected Intelligence Mobile Connectivity survey, 41% of smartphone owners are aware of the eSIM activation process.
- Cricket joins Visible, Mint Mobile and T-Mobile to launch a network test-drive initiative. As unlocked phones get more popular, we should expect to see more carriers joining Cricket, Visible, Mint, or T-Mobile to market eSIM-based free trial services. According to the same survey, 53% of smartphone owners are very or extremely interested in free trial offers from other services providers.