BlueFin Looks At iPhone Demand, Says Decrease In 2018 Models Largely Offset By Older Phones

Firsthand checks and research suggest Apple Inc. AAPL has "modestly" lowered its 2018 iPhone builds by 8 million units, according to BlueFin Research Partners. 

The Analysts

BlueFin's John Donovan and Steve Mullane.

The Thesis

Donovan and Mullane's deep dive into iPhone builds shows an "extraordinarily sharp ramp" will start in late August through September, the analysts said.

Production of the new LCD iPhone model is still running three to four weeks behind newer OLED models, Donovan and Mullane said. The 12 million new 2018 iPhone models that were initially planned for production were likely removed from the company's build schedules, according to BlueFin. In addition, another 5 million iPhone SE and SE2 units were also removed from planned production, the analysts said. 

Apple's cuts to its planned new iPhone and older SE and SE2 models are mostly offset by a 9-million-unit increase to planned iPhone 7 production, the analysts  said. This trend would be inline with what was seen earlier this year when cuts to the latest models were largely offset by increasing build of older models — but a reduction in total builds of 8 million units is still implied, Donovan and Mullane said. 

Total 2018 iPhone builds now stand at 219 million units, 38 percent of which is accounted for by new 2018 models, the analysts said. The figure is down from a 50-percent projection made earlier in 2018. 

Total shipments are now projected to be 221 million, but with sufficient inventory to make up for the "minimal disparity" in builds and shipments, the analysts said. 

Investors should have confidence in a potentially larger build schedule in 2019 due to the lack of upgrade activity seen over the past few years, according to BlueFin. A new 6.5-inch OLED should "satisfy those unhappy" with the iPhone X due to size concerns, the analysts said. And Apple will also likely offer devices for the " more budget-conscious buyers" and an extension of the iPhone 7 and iPhone 8 model builds for a "fairly extensive line-up" of devices, they said. 

Price Action

Shares of Apple were trading down by 0.16 percent at $191.40 at the time of publication Monday afternoon. 

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Photo courtesy of Apple.