Apple’s iPhone 14 series shipments still hampered by lack of supply: Counterpoint

Counterpoint Research released a research report today saying that despite facing foreign exchange headwinds and supply constraints, Apple’s revenue still exceeded expectations.

Analyst HANISH BHATIA said that Apple’s revenue in the September quarter of fiscal 2022 rose 8.1% year-on-year to a record $90.1 billion, far exceeding Wall Street expectations, highlighting Apple’s tenacious response to a difficult macro environment and unfavorable foreign exchange trends toughness.

With the exception of the iPad, Apple posted strong revenue growth across all product lines. Currency fluctuations continue to plague Apple, even as it enters the holiday season. Meanwhile, supply shortages related to silicon materials in the third quarter did not have a significant adverse effect on Apple.

Join us on Telegram

iPhone 14 shipments are still limited by supply shortages, at least for now

• Despite currency headwinds, Apple’s iPhone revenue rose 9.7% year over year on top of last year’s strong performance.
• Apple’s user base hit an all-time high, driven by record-breaking upgrades and double-digit growth in new users switching to iPhones.
• Another major milestone worth noting is that growth hit new highs even in the face of currency depreciation in emerging markets (i.e. India, Indonesia, Thailand, Vietnam, and Mexico), indicating that there is plenty of room for growth in these regions.
• According to preliminary channel surveys, the proportion of Pro models and higher memory versions in iPhone 14 series shipments is significantly higher, which further increases the average selling price of iPhones.
• In the first few weeks after the release of the iPhone 14, sales were limited due to supply constraints. Only after the first round of demand has stabilized can the forecast for the optimal proportion of “Pro” and “non-Pro” model sales and the impact of subdued macroeconomic factors on it will be possible.

Unprecedented growth in Mac sales driven by replenishing channels, fulfilling open orders, and launching new products

• Despite currency headwinds, revenue from Macs rose 25.4% year over year to an all-time high of $11.5 billion.
• Mac terminal supply improved and Apple was able to fulfill open orders from the previous quarter and replenish channels ahead of the holiday season. The release of the new MacBook Air and MacBook Pro powered by the M2 chip also benefited Apple.
• The Mac and iPad lines were hit by supply shortages in the last quarter, but Apple appears to have fixed the problem ahead of this holiday season.
• The Mac end-user base also reached an all-time high, attracting users to upgrade and users to use Macs for the first time.
• More than half of the users who buy a Mac are new users. This is critical for Apple as it continues to appeal to the creator base and will reach a wider audience.

iPad revenue declined mainly due to release timing

• Mainly affected by the timing of product releases, revenue from iPad fell 13.1% year-on-year to $7.2 billion.
• The iPad user base also reached an all-time high, with more than half of all iPad purchasers being new.
• Released in October, the iPad Pro (6th generation) features Apple’s latest M2 in-house silicon, ProRes, new SmartHDR, and faster network connections for heavy users looking for top-of-the-line specs (for the first time on an iPad model).

Apple Watch supply is still limited

• Wearables products also saw strong growth, driven by demand for the new Apple Watch SE, Watch 8, and Watch Ultra, but the supply of these products remained constrained during the quarter.
• The product category has grown despite currency headwinds and the loss of business in Russia. It is worth noting that two-thirds of users who buy an Apple Watch are new users.
• The new AirPods continued to contribute to the segment’s revenue but were also affected by currency issues.

The services segment is expected to grow, but risks loom

• With the user base of iPhone and other iOS terminals reaching a record high, the related service business will show an upward trend, and a super cycle may come. However, this segment is still more exposed to risk than other segments.
• Services segment revenue for the quarter increased 5% year over year to $19.2 billion, despite the significant impact of currency headwinds. This is thanks to a whopping 900 million paid subscriptions. Relevant paid subscriptions increased by 155 million over the past 12 months.
• Apple Inc’s iCloud and other paid services posted record quarterly revenue, but digital advertising and gaming services underperformed due to a difficult macro environment. This situation is likely to continue into December this quarter.
• Apple has raised the price of Apple Music subscriptions due to the increased cost of licensing content. And for Apple TV+, Apple has raised prices while continuing to expand its content library.

The corporate segment continues to win new business

• The B2B segment, which targets large enterprises, saw strong growth.
• Apple said Ford Motor Co. is applying advanced camera systems from iPads and iPhones to quality inspections for Ford’s next-generation F-150 electric pickup.
• Apple’s products also help companies such as Cisco attract new talent and retain employees.
• The high retention rate of Apple products remains a key selling point for Apple to attract new customers. Apple’s trade-in program further shortens product refresh cycles.

Overall, Apple’s firm grasp of its user base continues to drive business growth, while its “closed-loop ecosystem” strategy continues to increase user stickiness and introduce new users to the entire ecosystem. As Apple’s user base continues to hit new highs, the current macro headwinds are just a temporary hurdle in the face of long-term growth brought on by the supercycle.