All you need do to weigh whether this statement is true or not is to consider the following (by the way, all of the following are facts rather than rumors):
1. ATT says they have activated over 10 million phones in the holiday quarter...Including a record number of iphones
2. Verizon says they sold 9.8 million phones including a higher mix of iphones
ATT and Verizon are the 2 providers that most Apple(AAPL) longs sweat over because they represent the mature US market. If the mature market reported record sales, shouldn't that minimize concerns? Well, lets look at China...The other market that is scrutinized by all analysts and investors to try to garner some hints as to sales...
3. iphone sales in the first weekend in China topped 2 million. This says nothing about how many sold in the remaining 2 weeks of the quarter in China. The iphone wasn't even available in last year's holiday quarter!
4. ipad mini sales in China...Try to order one on the Apple online store in China and you find that even all these weeks after its' introduction, there is still a 2 week wait.
OK...So your reaction to this last point is that the WSJ article is about the iphone parts...Not about ipad mini. To that I reply that I only include point 4 so that you may ask yourself why an entire country of over a billion people is so crazy about the ipad mini but doesn't give a hoot about the iphone.
Finally, you may say that the WSJ article has nothing to do with what was sold in the holiday quarter but, rather, all about the dropoff in anticipated sales in the quarter that started on January 1(the quarter that kicks off the holiday season in China).
5. CEO Tim Cook tells the Chinese press that he expects China to become Apple's largest market.
6.Tim Cook tells the same press group, according to the translation of the text from Sina Tech, that "From the start of September, we updated the product line and launched the iphone 5 and it has become the most popular iphone ever." How can an iphone be the most popular ever if it didn't sell the most ever?
Is there any evidence that this is happening. After all, since January 1 was the kickoff to the holiday season in China, shouldn't the WSJ article be alarming. Once again, if you go to the Apple online store for China and try to order an iphone 5, you will find that there is plenty of stock available. If, however, you try to order an iphone 4 on the same site, you find that there is a 3 TO 4 WEEK WAIT!!!!!
Incidentally, the iphone 4 that has a 3 to 4 week wait comes only in the 8gb version and sells for RMB 3088. As of the date of this article(January 14, 2013), that translates to about $495 US. Given that the cost to make the phone is likely under $200, that makes for a pretty hefty gross margin that the people of China are lining up for.
One final food for thought...On December 6, 2012, Tim Cook appeared on an extended interview with Brian Williams on NBC. While the interview was aired on December 6th, I could not find the date that the interview was actually done. Presumably, the 2 part interview was actually conducted between December 1st and December 4th. The price of Apple stock in this time frame was between $575 and $595. As part of the interview, Brian Williams said, "You realize if you're a company that can keep amazing us, consumers, if you're a company that can stay fresh without an expiration date, you'll be the first company ever to do that. There is a cycle, a circle of life, a life and death. And you're trying to buck that trend." To that, and with a stock price between $575 and $595, Tim Cook said, "Don't bet against us, Brian. Don't bet against us.
Conclusion..If there is, in fact, a cutback on supplies of iphone 5 parts, it could be because of the initial overbuild of supply that some have written about. It may also be because of a quicker refresh cycle mentioned by others. But the bottom line is that the iphone sold well all over the world in the quarter ending 12/31/2012. These sales were not all iphone 5's. Many were, and will continue to be iphone 4s as well as iphone 4. So, in China, the "cheaper" iphone already exists. It is the iphone 4 and it is so popular that you have to wait 3 to 4 weeks for it!
This article is tagged with: Long Ideas
Disclosure: I am long AAPL.