Mobile Phones Blog

Apple cuts iPhone output while Macbook could go to O2

October 1st, 2008 by Peter

Apple has cut its planned production of iPhones in the second half of the year by up to 4m units, according to calculations by investment bank Pacific Crest Securities, in a move mainly geared to sustaining current pricing levels - but also perhaps indicative of lower than expected demand in certain markets, notably Japan.

In the squeeze on smartphone pricing, the iPhone’s operator partners are likely to carry some of the burden, with carriers like O2 UK battling to hit their targets for the phone, probably with increased subsidies. One way to cushion the impact will be to add new services to its bundles, some with less price sensitivity, and despite recent denials, O2 is still widely expected to become the first cellco in the world to offer a subsidized Apple Macbook with mobile broadband contracts, next year.

On the handset front, assuming the Pacific Crest intelligence is correct, the reduced figures would still put Apple in the position of turning out 14m to 15m handsets for the whole of 2008, down from the initial plan of 18m, but nevertheless making Apple a likely seventh or eighth in terms of handset sales for the full year, up from 29th place in 2007 (when the iPhone did not have a full year of sales, nor a 3G model). The bank actually expects Apple to sell more iPhones than it had previously predicted, with the reduced manufacturing bill contributing to better margins and pricing power, and to more efficient inventory levels. The firm raised its iPhone unit sales projection to 11m from 8m.

AT&T and O2 are reported to be seeing high demand for the 8GB iPhone 3G model, and any shortage of 8GB models may well pave the way for a new high capacity range, that would inject new interest and an upgrade rush into the iPhone line and offer a 32GB top end at around the same price point as the current 16GB plan.

Meanwhile, O2 is widely reported to be preparing to offer subsidized Macbooks along with fixed and/or mobile broadband contracts. Although the operator is denying the rumours, such a move would be in keeping with its recent aggressive progress in offering a wide variety of fixed and mobile connection bundles, and the extremely high profile it has given its Apple handsets.

Just as the iPhone is a differentiator from other carriers, so O2 would score significant marketing points by being the first to put a Mac, rather than a PC, on its books. It is becoming increasingly common for European cellcos to subsidize laptops in order to lure customers to lucrative, data-heavy mobile broadband contracts.

For Apple, though, it would be a major shift in its channel strategy, potentially reducing the perceived price tag and value attached to its Macbooks and creating conflict with existing dealers. Unlike many PC vendors like Dell, there is no indication that Apple is preparing its own low end, wireless netbook, and so the rumored deal with O2 would entail the greater risk of putting the high value Macbook into the cut-throat cellco channel.

This entry was posted on Wednesday, October 1st, 2008 at 9:00 am and is filed under General, O2, iPhone. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.