Analysts: The smartphone market suppressed by rising prices

- Adrian Ungureanu

Although initially there were some analysts who said that Apple is rewriting the laws of the economy, anticipating record sales for an extremely expensive product, the outlook on the smartphone market has changed radically.

The first few weeks have been encouraging for Apple and iPhone X, but as time has passed, reality has shown it was just a wave of enthusiastic shopping, and the iPhone X sales pace began to slowdown dramatically, forcing Apple to cut its production target to half of the original plan, in Q1.

Component makers are now seeing their business in jeopardy, and analysts blame the iPhone X and other expensive phones for suppressing the smartphone market.

Analysts in some of the largest financial and market research institutions say the average sale price (ASP) has risen sharply over the past year, and the market can no longer bear any price increases.

“The market may no longer tolerate rising ASPs. One factor that is likely suppressing the smartphone market is price. We see several indications the market elasticity is falling. Obviously, Apple’s iPhone ASPs have climbed from $645 in FY16; we model $742 in FY18. We do not believe it is coincidence that the highest end of the product portfolio, the X, is the model that is flagging”, said Jeffrey Kvaal, analyst at Nomura.

There is also a growing dose of skepticism about sales within Apple as well as their supply chain. “Sources inside Apple’s Asian manufacturing supply chain paint a much gloomier picture than Cook. This period of flat or declining sales is likely to continue for much of the rest of the year. The iPhone X didn’t sell well during the holiday season”, noted Longbow Research analysts Shawn Harrison and Gausia Chowdhury in a report.

So the prospects for Apple, but also for other expensive smartphone manufacturers, are not very optimistic, precisely because of the surge in prices.