The Case of the Disappearing iPhones 18 comments
April 02, 2008
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This is a strange story: According to various sources, most Apple (AAPL) stores in the country are newly out of iPhones. While you can order them from the Apple Store with 5-7 day delivery, you can't get them in stores.
Just to fact-check this a little, I made a few calls myself. I talked to six southern California Apple stores, and here is the gist:
- No iPhones at any of these six stores
- Most ran out Friday/Saturday
- They don't know when they will get more, so "just keep calling"
- It hasn't happened before
This is tough one to figure. Strikes me that one of three things is going on:
- Apple has a component issue and is doing a quiet recall
- Apple has a supply issue with a major sole-source supplier
- Apple is set to do a surprise launch of a 3G phone
I can't think of any other explanation, and none of these are very palatable. Even option 3), which would be nice, is disconcerting in the face of Apple unable to sell iPhones in-store for 4-ish days now. Anyone have any other ideas here?
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This article has 18 comments:
This is the issue. The customer-satisfaction numbers you see for iPhone in the US are no different internationally, in some cases they are much higher because the price ($399 and $499 is seen as perfectly reasonable, particularly in emerging markets used to paying higher premiums on US prices for BlackBerry and high-end Nokia phones).
Demand for iPhones outside the United States is out of control and has reached the point where it has started to impact Apple's normalized supply chain projections. It's okay to have a delta of, say, 100,000 units or so per year between actual and forecast. International demand is driving that delta upwards of 1 million. That's a whole different ball game for component sourcing, quality control and production ramp-up and some things are starting to come unstuck, even for a finely managed company like Apple.
What's driving this?
1. Free, out-of the box -ready, GUI-based network unlock solutions like Ziphone and iLiberty. Confidence in these unlock systems has grown significantly over time as technical expertise required to use them has fallen.
2. A large, very organized procurement mechanism for iPhones, particularly into Russia, Eastern Europe, India and China. There are people who go from store to store buying iPhones and aggregating them for export to "resellers" overseas.
3. Proliferation of Wi-Fi penetration and the recognition that in GSM countries, iPhone works simply and well enough. Wi-Fi hotspot usage is growing significantly around the world and the iPhone's superior web browser is taking full advantage to maximize customer experience. It's the right product at the right time for the macro-trend.
4. The iPhone is relatively cheap to emerging market customers used to paying $500 for a BlackBerry and a cheap US Dollar makes it an even better deal. For example in Russia, at $499, a16GB iPhone translates to around 12,000 Rubles. An 8GB Nokia N95 costs $815 or 20,000 Rubles. The value-for-money perception with iPhone is absolutely huge.
5. Zero or minimal compatibility issues on GSM Networks. I have used my iPhone with SIM cards from 32 different networks in Europe and developing countries. It works seamlessly. The iPhone is a quad-band GSM phone, meaning that it supports all four major GSM frequency bands, 850 and 1900 MHz bands which are used in the Americas, and 900 / 1800 MHz bands used in most other parts of the world, making it compatible with all major GSM networks worldwide. 2 billion people around the world use GSM phones.
To give you an idea of international demand; There are Nigerians shipping more than 500 phones a week from New York to Lagos and Nigeria is a third world country. The EDGE internet works perfectly, albeit just as slow, there and data is very, very cheap at $5 per 100 MB of usage.
"Data-driven" analysts like Munster and Sacconaghi get misled by the laziness of long-distance US-chauvinist analysis into making market projections based on perfunctory GDP per capita statistics and "population living on less than dollar per day" figures. They look at the wrong data because they think the world works in the same way everywhere. This weak analysis disregards latent middle and upper income demand in developing countries.
If you define a potential user as someone who can afford to pay twice as much for an iPhone and double what an AT&T subscriber pays per month, there are at least 7 million potential iPhone users in Nigeria, 9 Million in South Africa, 80 Million in India, 25 Million in Russia, 25 Million in Brazil, 8 Million in Indonesia and 100 Million in China. Not all of them will be users but just 5% of this number is way more than 10 million. Considering mobile phones are some of the most universally adopted products on the planet, a good GSM phone reaches Iran and Iraq much faster than people on Wall Street can ever imagine.
From research I'm conducting. we have conservative numbers of grey market as follows:
Russia 2000-4000 phones/week
China 4000 -6000 phones/ week
Demand from Western Europe is slower but still significant, averaging anything from 2000 -3000 units/week from New York and other big cities with international airports. Now, not all the phones shipped from New York are bought in NYC but the export pattern is clear and very strong.
I have completely ignored the cash-flush Middle East where Dubai has always been a world-leading port in grey market clearing and forwarding for consumer electronics.
Conservatively speaking, something is sucking 15,000-20,000 iPhones/week out of the United States. If this phenomenon is coinciding with steadily growing adoption among US customers, suddenly the slack Apple had is drying up.
Many of the millions of visitors coming to the United States every month are going back with a packed iPhone in their luggage. It's one of the things people are expected to buy when they come.
Foreign nationals are not very likely to buy iPhones at an AT&T store because the requirements are inconsistent (some stores were requiring SSNs, existing phone numbers and/ or activation), queues are long (non-starter for people with a limited window to get back to the airport), lack of other Apple products (iPods etc) and accessories and simply, AT&T stores are not landmarks.
Finally, the reason why used iPhones will begin to show up on eBay and other consumer-to-consumer sites in Europe is because individuals who speculatively buy an iPhone to resell are up against "organized unofficial" suppliers. You're much more likely to buy a phone from an expert hacker if you worry about fixes and other things. And yes, the parallel market is showing budding signs of getting sophisticated at providing some of the support Apple wont provide.
Oh well, maybe it's just version 2.0 coming out soon.
I think not.
If there were a supply problem or recall it would not be possible, IMHO to keep it a secret. The FUD sters would be all over this.
If you have a site where MORE of your research can be found, would you email me the link?
tantoday@yahoo.com
Thanks
I don't see enterprise buying as being a factor (a) because there isn't really an enterprise solution yet and (b) because enterprise IT buyers aren't going to jump into Gen1 with the 3G version so close to reality.
I worry about the iPhone cannibalizing MacBok sales. Not a problem, at this time, but COULD be, over time.
Apple shareholders could be the only people other than bankers and builders who see some benefit from Bernacke's insane money-printing excesses.
Excellent, but do you have a link? You won't see thousands of Blackberry's smuggled into Nigeria and Russia-- those are a US phenomenon, where gray-suited tech-hostile Exchange-fixated CIO droids rule the roost-- for now. With the iPhone taking better approach than RIMM to Exchange, though, even THAT market could be cracked open. It's almost irrelevant. GMail is a hundred times better than Outlook from a user POV, and the market will eventually figure this out. The web-- the "cloud"-- is where the action is going to be.
This would EoL current phones.
and if it is a component shortage why isn't the iPod touch suffering from the same issues.. something is brewing at Apple
The research we're working on will be available later.
Please do not misunderstand what I'm about to say but you really have an overactive imagination. I believe you are turning a component shortage into something much more than it actually is. However much I wish what you are saying is true, it really doesn't seem likely to be selling lots of iPhones in third-world countries where people have little to eat and electricity is scarce. I doubt if iPhones are selling on the black market at the rate you suggest. If that was the case Apple wouldn't even need to come out with a 3G model before the end of the year in order to reach the 10 million unit sales mark.
I really enjoyed reading your comments, but I just don't think that iPhones are selling that quickly where they've been legally introduced. France announced selling 90,000 iPhones and that doesn't seem like a heck of a lot. Maybe it was their hottest selling item, but it's still a drop in the bucket. I would have expected closer to 200,000, but I'm sure the initial cost and contract is more than most people are willing to pay to own one of the best designed handsets around. Apple won't bother introducing an iPhone in Russia until the middle of next year.
Anyway, I hope your figures hold some water because I want to see the iPhone sell in huge numbers. However, this time a component shortage is just a component shortage and nothing more.
There are more iPhones in China (a non-market, developing country) than there are in France (a mature, developed market with high income). The factor is 5x or 6x, maybe more.
We can only sell 5 iPhones per customer and they must be purchased with a credit, debit, or gift card--- but this doesn't stop people at all. They show up with multiple cards, have friends buy them. We once had a group of 10 people from Thailand attempting to buy 5 phones each. That's 50 phones! That decimated our stock for the day.
It's pointless trying to gauge iPhone sales in Western Europe as a measure of success, because so many europeans come HERE to purchase them with the strength of the Euro vs. the Dollar.