Apple, one of the biggest tech companies on the planet, doesn’t think it might sell more iPhones this year than it did last year, despite rumors that the iPhone 14 comes with some major improvements.
The company plans to keep iPhone production roughly flat in 2022, a conservative stance as the year turns increasingly challenging for the smartphone industry.
The company requires suppliers to assemble nearly 220 million iPhones, roughly the same as last year. Market forecasts spoke of 240 million phones, driven by a major iPhone update expected in the fall.
But the phone industry has had a rough start to the year and overall production estimates have fallen. The worst inflation in decades, the war in Ukraine and supply chain disruptions threaten sales in 2022.
Strategy Analytics has forecast that overall smartphone shipments could shrink by up to 2% in 2022. TrendForce has also twice cut full-year production forecasts in recent weeks. While IDC and Bloomberg Intelligence analysts expected about 240 million iPhones for this year earlier this period.
The outlook for Apple may change depending on the economy and supply constraints in the coming months. The company did not disclose its production targets. It also stopped disclosing how many iPhones it sold in 2019.
The company warned that supply problems could affect sales by between $4 billion and $8 billion in the current quarter.
This is largely because the coronavirus lockdowns are causing problems on production lines in China. The entire tech industry is bracing for a slowdown in consumer spending as rising fuel and material prices raise the cost of daily necessities.
Apple wants to produce 220 million iPhones by 2022
The overall smartphone market got off to a rough start to the year, with shipments down 11% in the first quarter, the worst drop since the pandemic began two years ago.
And Xiaomi – the world’s third-largest smartphone maker, after Apple and Samsung – recorded its first quarterly decline in revenue this month.
Apple is betting on elastic demand for its hardware due to its relatively richer customer base and the strength of its ecosystem of software and services that fuel hardware sales.
The company is also seeing less competition now that its fierce competitor Huawei has been excluded from the market. Huawei, which was once the number one phone maker in terms of shipments, has seen revenue decline for six straight quarters.
Moreover, Apple hopes to entice consumers with an iPhone that is more successful than last year’s model.
The upcoming iPhone 14 phones, due out in the fall, are expected to offer new screen sizes and more new features like satellite texting.
The iPhone 13, which was released last September, was considered a minor update. The company has also released an updated iPhone SE that includes 5G, fueling the upgrade cycle for budget-conscious consumers.
Although the Chinese shutdowns are poised to cause significant losses to the company this quarter. But Apple expects to manage the disruptions.
Foxconn, the major manufacturer of iPhones, has been able to keep most facilities running. This includes its largest group of factories in Zhengzhou, central China.
Usually the demand for smartphones recedes in the second quarter. This means that the impact of the shutdowns will not be very severe.
Suppliers are trying to make up for any production shortfall later in the year as long as China fully reopens and restores transmission lines.