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Apple is reportedly facing production delays of four to eight weeks relative to the output it would have maintained if not for the coronavirus pandemic, according to Nikkei Asian Review. Nikkei notes that Apple and its suppliers have been steadily chipping away at this production delay by working overtime.
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These efforts are intended to minimize or eliminate a delay to the typical September launch for the 5G iPhone lineup. Even in March 2020, Apple was said to be considering delaying the launch of the 5G iPhones to 2021, motivated by both supply chain disruptions and the anticipated lukewarm consumer demand during a global economic recession.
Apple slashed its 5G shipments forecast and increased orders for cheaper iPhone models, which will help the company address consumers’ changing spending habits in the recession. According to Nikkei, Apple revised its pre-pandemic 5G iPhone order projection from 100 million to 80 million, which means it now expects 5G iPhones to sell just about as well as recent generations of iPhones. This suggests that Apple still expects 5G functionality to drive sales, considering the economic conditions would otherwise result in a decline in shipments.
For the second half of 2020, Apple is also said to have ordered 45 million additional units of cheaper iPhones, including the $400 iPhone SE, $600 iPhone XR, $700 iPhone 11, and $1,000 iPhone 11 Pro. Price-sensitive consumers who want to remain in the Apple ecosystem may be more inclined to opt for less expensive options. This could help Apple stop consumers from switching from iOS to Android, which supports a wider variety of more affordable devices — 75% of US consumers have changed their shopping habits since the onset of the pandemic, including trying new brands, according to a McKinsey report from June 2020.
An on-time launch of 5G iPhones would help usher in 5G adoption outside of China, benefiting wireless carriers in the US and Europe in particular. The coronavirus has undoubtedly suppressed 5G smartphone adoption, and those impacts have been particularly strong outside of China, which leads the world in terms of 5G subscribers. Chinese smartphone vendors accounted for 61% of the total 24.1 million 5G devices shipped in Q1 2020, and the majority of those sales remained in the Chinese market, according to Strategy Analytics.
Apple — which derived 68% of its revenues from the Americas and Europe in the three months ended March 28, 2020 — will serve as a significant catalyst for driving 5G adoption outside of China. In turn, this will make it easier for wireless carriers in those markets to steer consumers to their premium plans, pushing back against the overall trend of consumers cutting discretionary spending.
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