Apple is reportedly reducing its sales expectations for the iPhone 16 series, according to analyst Ming-Chi Kuo. The company is said to have lowered iPhone 16 orders by about 10 million units for the period between the fourth quarter of 2024 and the first half of 2025, mainly affecting the non-Pro models. This adjustment places the production of iPhone 16 at 84 million units for the latter half of 2024, down from the initial estimate of 88 million units.
The overall impact on iPhone production is noticeable, with forecasts indicating a significant year-over-year decline. Estimates now stand at around 80 million units for Q4 2024, 45 million units for Q1 2025, and 39 million units for Q2 2025, all lower than the previous year's numbers. Although Apple's iPhone revenue in Q4 2024 might partly withstand these cuts due to a favourable product mix, a notable decline is anticipated in the first half of 2025.
Kuo attributes part of this shortfall to stagnation in Apple's hardware innovation. The iPhone 16 Pro and 16 Pro Max feature slightly larger displays and modest camera upgrades, but these changes are seen as evolutionary rather than revolutionary. This incremental approach may make it challenging for Apple to persuade existing users to upgrade annually.
Over the past four generations of Pro models, the core design and technical specifications have remained largely unchanged, with only slight increases in display sizes. While processor advancements have improved user experiences, other features like USB-C connectors and always-on displays may not be groundbreaking. The iPhone 16 Pro introduces new AI features, such as "Visual Intelligence" and "Genmoji," but these do not seem to drive significant consumer demand.
The upcoming iPhone SE4 could also influence Apple's product mix. Kuo suggests that with mass production starting in December 2024, the lower-priced SE4 might cannibalise sales of more expensive models, further affecting the product mix. The report notes that Apple suppliers are likely to face pressure from late Q4 2024, with more pronounced effects in the first half of 2025.
Despite recent cuts, there is optimism about Apple's AI capabilities potentially boosting future iPhone shipments. However, such growth will likely depend on further hardware innovations to complement these AI advancements. Kuo mentions that Apple's focus on on-device AI appears promising for the long term.