Lost, Not Deferred, iPhone 14 Sales, Settled Lawsuits and Then Good News

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A troubling prediction for iPhone 14 Pros, good news for Apple on the smartwatch front, and a surprising PR move for Apple TV+. These are the sorts of things we see from the Observation Deck today.

Ming-Chi Kuo: Most iPhone Sales Missed This Quarter Will Be Lost, Not Deferred

Kind of an odd post from TF International analyst Ming-Chi Kuo to start us off today. First off — iPhone 14 Pro and Pro Max shipments for the current quarter are going to stink. That part is neither odd nor surprising. For well over a month now we’ve heard of production problems for Foxconn’s “iPhone City” plant in Zhengzhou — the primary source for most of Apple’s Pro-level phones. His expectation of this quarter’s miss is drastic, though. 

In a post on Medium, the analyst says he has cut his unit numbers for iPhone 14 Pro and iPhone 14 Pro Max by 15 to 20-million units. While most Apple watchers are looking for between 80 and 85-million Pro phones moved this quarter, Ming-Chi Kuo is only expecting the company to ship 70 to 75-million units. For November, he says the Zhengzhou plant was operating at about 20% capacity. He expects that to rise to between 30% and 40% in December. While Pegatron and Luxshare “have obtained about 10% of the iPhone 14 Pro and 14 Pro Max orders from Foxconn,” they won’t start shipping in earnest until late December — and that still only gets you to about half the shipments initially planned. 

A Trickle-Down Effect on Supply Chain Earnings

This will, of course, cause earnings ripples in the supply chain. “Apple’s iPhone revenue in 4Q22 may be significantly lower than the market consensus by 20–30% or more,” according to the analyst. Given the issues with zero-COVID in China and unrest among its workers, the analyst figures Foxconn will lose its exclusive deal to build Pro models in the iPhone 15 line, so that’s a hit for that company. He also sees ripples in components, with assemblers not needing as many next quarter as previously expected because they’ll be sitting on a surplus from the current quarter. 

But the phones all get sold eventually, right? Now we’ve hit the odd part. While one thinks of Ming-Chi Kuo as a products guy and a supply chain guy, I don’t usually think of him as a “greater economy” guy. He stepped out on that limb on Tuesday, though. While a number of analysts have said that sales missed this quarter are sales deferred rather than sales lost, Young MC disagrees. Quoting his post:

I believe that most of the demand for the 4Q22 iPhone 14 Pro series amid the economic recession will disappear due to the significant supply and demand gap rather than deferred.

Maybe that’s what beat down Apple shares on Tuesday. Maybe it was the continued goading by the chief troll at Twitter and his newfound friends in Congress. Whatever the case, Apple shares were down three-bucks and change on Tuesday, ending the day at $141.17.

Counterpoint: Apple Owns Half of High-Level Smartwatch Market

If you’re looking for good news around Apple, check the time. New data from Counterpoint Research indicates that half of High Level Operating System smartwatches sold globally last quarter were Apple Watch models — and more than half of that half was Apple’s latest Series 8. 

This is a market that has way not settled. Counterpoint divides the category into two sub-categories: basic smartwatches and High Level Operating System (HLOS) watches. While the HLOS segment grew 23%, the basic watch category “more than doubled YoY…” They were still dwarfed by HLOS watches, though. Basic watches only accounted for 35% of the total market, with the other 65% devoted to HLOS devices. Apple Watch owned just under 51% of that 65%, with Apple Watch Series 8 accounting for 56% of Apple’s 51%. 

The top market for smartwatch sales last quarter will likely surprise you. “In terms of regions,” says Counterpoint:

…India occupied the top position for the first time. Senior Analyst Anshika Jain said, “India’s smartwatch market grew 171% YoY in Q3 2022 to become the biggest market in the world.”

A few factors drove that growth, including India’s festive season, expansion of homegrown products at affordable prices, and an “emphasis on local manufacturing…” which sounds both repetitive and redundant. Though the Counterpoint release does not make it clear, one assumes that the emphasis on locally made products and affordability means India was mostly buying basic smartwatches, not HLOS devices. Running down the regions:

  • First place India accounted for 30% of the smartwatch market in the September-quarter, up from 14% for the same quarter a year earlier. Shipments there grew the aforementioned 171%.
  • Second place North America saw its share contract from 27% in the third-quarter of 2021 to last quarter’s 25%. Shipments still grew 21%, according to the report.
  • Zero-COVID and “the subsequent economic downturn,” sent third-place China’s share from 22% in the third-quarter of 2021 to last quarter’s 16%. Shipments there were off 6%, according to Counterpoint’s counting.

Apple Gets Preliminary Approval to Settle Butterfly Keyboard Suit

Apple’s got the preliminary go-ahead to settle a class-action Butterfly Keyboard lawsuit. MacRumors highlights a report from Law360, saying a California federal judge has given early approval for Apple to settle the case for $50 million.

If you’re like me, you remember this problem very well. Apple introduced the Butterfly Keyboard back in 2015, saying it provided a better feel, more stability, and let the company make laptops that were thinner than previous models. There was just one problem though: They kind of sucked. According to MacRumors:

Thousands of people ran into problems with repeating keys, sticky keys, and keys that otherwise failed when dust and other particulates got into the butterfly mechanism. The complaints led to a huge controversy over the butterfly technology, and Apple ended up launching a keyboard repair program in June 2018.

Cool that they were fixing them, but the fix was to replace one Butterfly Keyboard with another, which — surprise — was also prone to failure. So, people in California, Florida, Illinois, Michigan, New Jersey, New York, and Washington sued the Cupertino-company, Apple offered to settle for $50 million, and now a judge has given the preliminary okay. 

If you’re wondering how that $50 million breaks down, MacRumors says it’s “$1.4 million in settlement administration costs,” “up to $2 million in litigation costs,” and “$13.6 million in attorney fees…” The piece says affected customers will receive amounts “up to $395,” but you’ll need to have had two or more repairs to get that — I’m gonna use this word even though I don’t mean it — much.

The report says affected Mac owners who had such replacements should start receiving settlement notices sometime in December.

Bollards Go Up in Front of Apple Store in Hingham, MA

So the Apple Store in Hingham, MA has safety blocks now. Boston’s WBZ-TV (via MSN) says just over a week after an SUV drove through the front window of Hingham’s Apple Derby Street Center, killing one and injuring several, “new steel barriers were put on the sidewalk along the boarded-up storefront.” 

Not surprisingly, the move came just ahead of a lawsuit. “Attorney Doug Sheff, who represents (…) people who were hurt in the crash, [was] expected to file [a] lawsuit [this week],” according to WBZ. And he did. While the ‘BZ piece was written before the suit was filed, a piece from CNN (via MSN) says suits have been filed on behalf of two of the injured parties — one of whom is identified as an Apple employee. Before filing the suit, the attorney argued that the “tragedy was 100% preventable,” for a relatively small amount of money. Plenty of blame to go around, in his estimation, with some for the driver, some for the “companies that developed, own, and manage the property,” and — of course — some for Apple. 

The CNN piece says says little about particulars of the lawsuits, except that both are seeking jury trials. While both CNN and WBZ reached out to Apple and the property owners, neither received comments for their reports.

Reports Say Apple Pay Likely Launching Today in South Korea

Apple Pay is likely going live in South Korea this week. In fact, it may have already. A piece from 9to5Mac says “a local bank is announcing that its customers will be able to use Apple Pay starting November 30.” Checking the start of today’s show — that’s today. The piece cites a Twitter post showing “advertisements of Hyundai Card (a credit card owned by Hyundai Motor Group) getting Apple Pay support” today. Assuming the ad is correct, that’ll mean Apple Pay going live in South Korea today, since it hasn’t yet. Unless it has. We’re down to this being a minute-by-minute thing.

Will Smith Promotes ‘Emancipation’ on ‘The Daily Show’

And finally today, something of a public relations surprise: Will Smith may be doing the rounds to promote the Antoine Fuqua-directed historical drama Emancipation. 

Set during the Civil War and based on a true story — the film follows Peter, a runaway enslaved person in search of his family. Eventually, according to a piece from The Mac Observer:

…Peter joins the Union Army. During a routine medical examination, doctors discover scars on Peter’s back, brought about by plantation owners. [The] newspaper The Independent took photographs of the scars and printed them, making it one of the first times the cruelty of slavery was truly brought to the public eye.

When the film was made, it seemed to have Oscar written all over it. Then the film’s lead, Will Smith, slapped Chris Rock during this year’s live Oscars telecast. That may have put a damper on the film’s prospects, though Smith hopes not — hence the public relations surprise. 

A piece from Cult of Mac says Smith appeared this week on The Daily Show with Trevor Noah. There, the piece says, he offered no defense for the slap, saying simply, “I lost it.” But he doesn’t want his rash action to cost others involved with the film recognition. The piece has Smith saying:

Emancipation is [Antoine Fuqua’s] masterpiece. He has created an absolute masterpiece… Bob Richardson the [Director of Photography], and [actor] Ben Foster and just all the way down, it’s like these top artists in the world have done some of the best work of their career. 

Smith went on to say, “I hope that their work will be honored and their work will not be tainted based on a horrific decision on my part.”

You can see the full interview on YouTube. As for the film, Emancipation starts a limited theatrical run this Friday 2 December. It begins streaming on Apple TV+ one-week later on Friday, Dec. 9.

Today on The Mac Observer’s Daily Observations Podcast

Mac Geek Gab co-host Dave Hamilton is really excited about Rapid Security Response coming in iOS 16.2. I am as well, and yet — I seem argumentative about it. Also — societal norms around smartphones are still being hammered out, in Dave’s estimation. He’ll drive a conversation about those today on the Daily Observations Podcast from The Mac Observer.

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