Temporary, repeated insanity: Misunderstanding iPhone part orders


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Turn the clock back, if you will, all the way back to early February.

No, not literally, Doug. It’s a figure of speech.

Besides, that’s an analog clock. You’d just be… You know what? Never mind.

Back in February, Nikkei sounded alarm bells (again, figuratively, Doug) about iPhone X sales, indicating that supply chain sources had said Apple cut part orders for it in half for the quarter, from 40 million units to 20 million. Analysts anamalyzed that the iPhone X must be a real loser and people should get out of Apple’s stock before the company went out of business which could happen any minute.

The Macalope responded by banging his antlers on his desk, screaming into the void and then staring out the window for three days completely unmoving and unblinking. Then he pointed out the obvious, that there was no freaking way Apple thought it would sell 40 million iPhone Xs for the quarter when it had sold 50 million iPhones total in the same quarter the previous year.

Analysts took this to heart and went back to their sources and realized, hey, that rumor was wrong! Haha! It wasn’t 40 million! Duh! How silly! No, Apple cut the order from more like 45 to 50 million units to 20 million. There. Now it’s right.

Anyway, we sure had some fun in February and the Macalope had to get a new desk.

Fast forward to this week and Apple’s results for the quarter showed that the iPhone X did just fine, thank you very much. But tucked into Apple’s quarterly conference call was a comment made by CFO Luca Maestri:

Our inventory level has gone up. It's just a temporary event. We have decided to make some purchasing decision[s], given current market conditions, and that should unwind over time.

Horace Dediu picks up on this point.

Analysts could have been deceived because Apple purchased components early aggressively and then cut orders abruptly. The evidence is in inventories rising. This may have been strategic: denying competitor access to capacity; or an error.

So, after all that disagreement between the Macalope and analysts, it’s quite possible we were both wrong. [truly tepid applause] Maybe Apple did make a big order and then cut it dramatically, but it wasn’t a sign the iPhone X wasn’t selling well — after all, there’s no way Apple was thinking it would sell 50 million iPhone Xs in the quarter — it was the company making smart business decisions.

At least the Macalope’s mistake was directionally correct, there was nothing wrong with the iPhone X’s sales.


That’s it. Doug is no longer invited over for pancake Saturday.

Dediu further chastises analysts:

And they have been warned specifically not to do this. The seduction of access to privileged (non-public) data is irresistible. Prioritizing data because it’s exclusive is the pitfall that all analysts must resist.

Surely analysts will take this to heart and hahaha, no, we’ll do this exact same thing again in a year.

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