The iPhone 16 went on sale Friday, the latest generation of Apple (AAPL) devices already flying over shelves and into consumer hands this morning.
BofA Securities Senior IT Hardware Analyst Wamsi Mohan joins the Morning Brief to talk about Apple’s lead times as it hopes to push a product upgrade cycle with the new iPhone, despite it coming out without the key AI features it showcased earlier this month.
For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.
This post was written by Luke Carberry Mogan.
Video Transcript
Apple’s new iphone out today and shares have been under pressure in the lead up to the launch amid concerns surrounding demand data from Bank of America finding that the iphone 16 models are seeing shorter global shipping times for the new models compared to last year, possible indication of weaker demand.
Joining us now to weigh in, we want to bring in WSI Mohan Bank of America Security Senior I hardware analyst bombs.
It’s great to have you.
Um With us here again, let’s talk about your initial findings, the data that you put out because your note earlier this week really caught our attention.
You were basically saying that early reads here.
Some of those lead times on the new iphones were lagging last year’s new model.
Talk to us about is that a demand problem?
Is that a sign of better supply?
How should investors be reading that?
Yeah.
No, thanks for having me.
Good morning.
Uh Look, I think that there’s, there’s two elements to it.
First of all, uh when you look at the data itself, it is showing that the lead times or initial order lead times.
Uh all the ship dates are, are less extended than they’ve been in prior years.
So let’s put that in some context, right?
Um What is Apple done and found over the last few years first, it’s found that uh more consumers are switching to pro models and we’re seeing that in the revenue estimates, uh their revenue reported results uh that that truly uh the mix is shifting and the A SPS are higher and the mix is shifting to pro model.
So Apple has been building more promos into this launch to accommodate for the higher demand for the pro model in general.
So that’s one thing that could cause the ship times to to be less extended than last year.
The second thing I would point out is that last year, uh there were some delays with respect to the Pro Max by a few weeks and that was, that was because it was the first time they introduced this tetra prism lens in the camera.
And uh this year they have more experience with that.
So the the production process actually is just uh a little bit smoother.
So you have more, more phones available.
And the last thing I point actually too is that y you know, one of the very interesting things that that has happened over here is that Apple has uh started production early as well.
Uh So our supply chain checks from Asia suggest that this year the production started a bit earlier and maybe it was to circumvent any unknown issues that might happen through this production process.
And so the availability at in general is better.
So our note from earlier in the week was stating the facts as they are, which are that the lead times across the board are lower, but we wouldn’t make a full cycle call based on that because of some of the reasons I just alluded to.
So what does that, what does that translate through to for, for Apple’s their, their pricing power that has really come into focus, especially given the backdrop of the consumer environment right now.
Yeah, it’s really interesting Brad look.
I mean, I think that um Apple is one of those companies that actually has very low price elasticity to demand for iphones in particular, there’s a lot of demand elasticity when it comes to things like wearables or the watch or other Apple products in general.
But when it comes to the iphone, when you think about most of the iphones that are sold globally, they’re generally on some kind of installment plan financing plan.
So what consumers are actually shipping uh or shelling out between a non pro model versus a pro model is not super meaningful.
It’s a it’s a few dollars more and you get a whole lot of functionality more, right?
Like better screen size or improved screen size, large screen sizes, you got improved battery life, uh better camera performance.
So generally you’ve seen the sensitivity uh even though you have this whole slew of products available that 60 65% of people are choosing Pro Pro Max.
And, and I would say that given that, given that globally, there are a lot more countries now that support financing plans.
Uh because a lot of company uh countries that were initially uh cash based economies are moving to credit based economies.
And what that does is allow for financing of these phones, which means that the cost of acquisition is low.
Apart from that, they’re also doing two more things which is trade ins and carrier incentives, right?
And those are pretty high, which we pointed out as well.
So I think the the net of all of this is that even if you enter a softer consumer spending environment on the margin, of course, there’s going to be a demand impact.
We just think that the volatility of the demand impact from a weaker consumer is much lower at apple than it would be at other, other many other companies.
