Forecasting iPhone production and sales

Analyst Jeffrey Fidacaro with Susquehanna Financial Group in a note to investors:

  1. Apple to build 3 million CDMA iPhones in December
  2. That would put total GSM and CDMA iPhone production for the quarter at between 21 million and 22 million.
  3. For the current quarter, Apple is set to build between 18.2 million and 18.4 million GSM-only iPhones.
  4. Expects Apple to sell a record 11.6 million iPhones in the fourth quarter of the company’s fiscal 2010. 39 percent q/q increase[1][see UPDATE below]
  5. As for the iPad, suppliers were said to have plans to build 7 million units for the current quarter, a 56 percent increase from the previous three-month frame.
  6. Expects Apple to ship 4.75 million units into the current quarter, 45 percent growth q/q, to a total of 13.4 million units in calendar 2010.

via AppleInsider | Suppliers say Apple will build first 3M CDMA iPhones in December.

What I don’t get from these numbers:

  • current quarter production: 18.2 million
  • current quarter units sold: 11.6 million
    • inventory at end of Q: 6.6 m units [I am assuming minimal inventory at start as iPhone 4 was just launched]
  • next quarter production: 21 million
  • next quarter units sold: ?
    • inventory at start + production = 27.6 million

My own estimate is for more than 12 (and up to 13) million units will be sold this quarter. I think inventory of more than half of production is too high for Apple. They usually carry only about 10% inventory.

My December quarter units sold may need revision but now stand at 14 million. If I substitute 14 million in the “?” above  then the inventory at end of December would be 13.6 million which would be nearly 100% of units sold–clearly unacceptable. Either production is too high or sales are too low.

I am at 4.7 million iPads for the quarter an 13.9 million for the year. No major difference in opinion.

[1] This forecast for 39% growth would make this quarter the second lowest growth quarter for the product. This makes is hard to believe because every launch quarter has usually been breaking records for growth. The 3G launch saw 516% growth and the 3GS saw 644%. To see 39% for the iPhone 4 makes me wonder especially as the comparable year ago quarter was not a launch quarter so growth should be off a low base. Last quarter, when the iPhone 4 was leaked and the channel was drained the product had 61% growth.

Compare also to the Mac which had 33% growth last quarter. Are we to believe that launch quarter iPhone growth is barely higher than Mac growth?

The figure of 11.6 million is also in-line with other analysts which seems to indicate another forecasting failure for the cohort.

[UPDATE] I checked the figures and 11.6 million iPhones is equivalent to 58% growth y/y. The (now corrected) article was citing q/q growth. However, 58% growth is still the second lowest growth quarter for the product.

  • Chris

    Assuming that the GSM and CDMA iPhones are made on the same production lines, I think it's possible that Apple is stockpiling GSM iPhones so that they can respond immediately to any excess CDMA demand, given that it's a somewhat unknown quantity right now.

    • Good hypothesis. Still, carrying that inventory for months on end sounds extremely un-Apple especially since the product is still hard to get a hold of.

    • FalKirk

      Chris, your post confuses me. Why would you stockpile a phone that is selling faster than it can be made? This makes no sense at all. But even more confusing is your suggestion that Apple would stockpile their GSM phones in order to respond to excess CDMA demand. How can one use a GSM phone to respond to CDMA demand?

      Perhaps the fault is mine. My reading comprehension isn't always what I wish it were. Could you please clarify your statement?

      • Chris

        Falkirk, I'm glad to explain.

        First off, the original post explains that Apple is in fact making phones faster than they are selling. If you believe the numbers, then Apple is making twice as many phones as they are going to need. I suggested that they are doing this to stockpile a month's supply of the GSM version of the phone. According to the story, this will be at the end of December. The numbers also say that they will have built 3 million CDMA phones by the end of December.

        So now it's January 1st, and let's assume the CDMA iPhone goes on sale. Apple doesn't know how many CDMA phones they will be selling, so the 3 million is just for initial demand. If there is a *huge* CDMA demand, then Apple can use all of it's production lines in January to make CDMA phones. Since they stockpiled GSM phones, they will still be able to sell GSM phones to the public. If the demand for CDMA phones is smaller, then Apple can use some of the production lines for GSM phones and some for CDMA phones.

  • JonathanU

    Would love to see your reasoning behind your iPad number? How much upside to this number do you think there is?

    I personally think the number is a tad low at present…

    • It certainly is low. I am trying to be honest and not change it much as new data comes in. I picked the number in January when I first laid eyes on a photo of it.

      To see other forecasts:

    • JonathanU

      Surely you'll revise the number when PED starts collating responses for the next quarter predictions though right? If so, do you have any sort of early stage guidance to what that number might be?

      • Still chewing on what the number should be. The material news was the reduction in delivery time a few weeks ago indicating no more supply constraints. This means I have to think more about what demand was running in the second half of the quarter. I might go with 5.5 to 6 million for the quarter.

      • JonathanU

        Agreed. That is looking like the right range at present.

  • Iphoned

    Building twice as many phones as they are selling???

  • RobDK

    Jeffrey Fidacaro with Susquehanna Financial Group CANNOT be trusted! From AppleInsider:

    "Earlier this year, before the iPad was announced, Fidacaro conducted an assumed component breakdown on the then-mythical device, projecting it to include a 4200RPM spinning hard drive and an Intel Atom mobile processor."


  • kevin

    I think his numbers work out if it is assumed Apple has about 1 month worth of inventory; i.e., Sep production is sold in Oct.

    Given the 18.2m production in current quarter, one could assume it was approx 5, 6.5, 6.7m for Jul, Aug, Sep, respectively. So for this quarter, the estimated 11.6m would include very little inventory (iPhones in transit) from Jun. (I think the 11.6m estimate is low.)

    In the article, Fiducaro didn't provide an estimate for Oct-Dec sales, but under this line of thinking, it would have to be 18m or more, with Jan-Mar hitting 21m.

  • MattF

    My guess is that Apple's suppliers have agreed to produce mixes of iPhone flavors for, say, the next six months, within some specified possible ranges of combinations. These suppliers then go to -their- suppliers and get agreements about flexibility in supply and manufacturing… and so forth down the line.

    I doubt very much that Apple itself holds much (if any) inventory of anything, and trying to estimate the value of Apple's inventory is futile. What -is- likely is that there is the potential for a few key variations in the manufacturing process that are dispersed down the supply chain. Apple bears the cost for -designing- that variability, the costs of -doing- the variability are borne by the suppliers.

  • Matthias

    I was waiting for my iPhone for 11 weeks now. So long that i cancelled it.
    My guess is that they are launching on multiple carriers in the near future (October was rumored for Germany) and they want that launch to be a success. So they are stocking em up.

  • Iphoned

    >>launching on multiple carriers in the near future (October was rumored for Germany) and they want that launch to be a success.

    That’s sounds reasonably plausible. Still, kind of odd that the’d be building so many more iphones vs sales while folks are waiting for 3 weeks to get one. On the face of it, it seems they’d be better off fulfilling existing demand as fast as they can.

    (Interestingly, I found out that some Apple stores are fully stocked – immediate iphone4 availability on walk in. But others have a 3 week wait. Odd also.
    Something is quite odd about those analyst numbers…

  • Rob Scott

    I feel for people who predict iPhone/iPad numbers. For example the iPhone launched in South Africa this morning and by noon both operators were out of stock in most stores. The expectation is that all store will be sold out by end of day today and it will be at least a week before replenishment stock comes in. The demand on this thing is simple amazing.

    As if that was not enough, it is price very aggressively, I do not expect the carriers to catch up with demand until at least Feb/Mar next year.

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  • iOSWeekly

    They must be assigning a certain amount to new market launches every month, as they always seem to have a limited immediately supply on launch day in new markets, yet other markets remain on 2-3 week delivery backlog.

    With china coming on stream, it might require a large stockpile for launch. Once it's rolled out everywhere the stockpiling would only be occurring for a new product like coma model, and then they should be back to less than 10% inventory.

    And then next June it starts all over again with the iPhone 5 & iPhone slim.

    iPod touch uptick could be eating up some supply capacity also.

  • rd

    In other news. iPhone 4 is now available in 38 countries.
    This weekend is went on sale in Israel, Romania, Turkey, Thailand,
    Malta, Malaysia, Hungary, Guam, Philippines, Croatia, Russia, UAE and

    Probably some more countries but you have to search for
    individual countries in order to get this information since
    Apple only bothered to release PR for China only.

  • Priit

    You may call it "available" if you like. Available by Apple means something totally diffrenet than in the dictionary. And yes, iPhone4 is now "available" in my country too.

    • rd

      Which country is that.
      part of the problem is that Cell carriers
      are the one ordering. So blame them.
      Second Apple has to stop the grey market
      people from buying from US and other places
      and shipping to where it is not available.
      So your situation should improve.