Barclays Analysts Report "Weak" Demand for iPhone 16 Following Supply Chain Check

Wall Street Divided Over iPhone 16 Demand

Opinions on Wall Street regarding the demand for the new iPhone 16 are split. Some analysts are of the view that the phone's new artificial intelligence features are driving a significant upgrade cycle. On the other hand, some argue that the demand for the more expensive models has dwindled.

Barclays Analysts' Note on iPhone 16 Demand

The most recent note on iPhone 16 demand comes from Barclays analysts, led by Tim Long and George Wang. After conducting supply chain checks, the analysts found that Apple likely reduced the production of the new phone for the December quarter due to lower-than-expected demand.

"Our checks indicate that orders have been cut for December quarter iPhones at a key Taiwanese supplier. We have previously discussed shorter lead times across iPhone 16 models globally, both of which indicate softer demand for iPhone 16, in our view," Long wrote in the note to clients on Tuesday morning.

Findings from Supply Chain Checks

The analysts discovered through supply chain checks that about 3 million units may have been cut at a top Taiwanese supplier. This comes after a recent report that showed a 15% YoY decrease in global iPhone 16 sales in the first week of sales.

"Overall, possible iPhone build cuts, weak sell-throughs, and shorter lead times suggest a softer start to the iPhone 16 cycle with a negative mix shift due to weakening consumer spend, macro pressure, and competition," the analysts noted. They added that the roll-out of Apple Intelligence in Chinese language is not until 2025, which may dampen early enthusiasm for iPhone 16 in that crucial market. Europe is also likely to see a staggered AI launch through 2025, which could limit excitement for the new device.

Implications of Supply Chain Checks

If the analysts' supply chain checks are accurate, they explained, "We think Apple's order cut this time, if confirmed, implies the earliest cut in recent cycles as Apple typically makes its first order adjustment in early/mid-October based on sell-through data points."

Barclays maintains an "Underweight" rating on Apple and forecasts a price target of $186, down from its prior target of $233. Shares in the premarket are down slightly over 1% to the $230 handle, trading shy of record highs.

Other Reports on iPhone 16 Demand

Several other reports have been cited that suggest the much-anticipated AI iPhone launch cycle has likely disappointed. These include reports of Apple iPhone 16 discounts offered at major Chinese online retailers, weak iPhone 16 Pro demand, and iPhone 16 sales falling short of expectations.

Positive Developments and Improving Demand Trends

Despite this, Morgan Stanley analysts have reported that lead times for iPhone 16 Pro and Pro Max models are stabilizing, marking an unexpectedly positive development. JPMorgan analyst Samik Chatterjee also noted that demand trends are improving via its Apple product availability tracker. This was enough to boost Apple shares higher on Monday.

Last month, Wedbush Securities' Daniel Ives stated that this is the "beginning of an AI-driven iPhone supercycle."

In conclusion, Wall Street analysts have varying opinions, with no clear consensus on the demand for the iPhone 16 since its launch last month.

Bottom Line

The conflicting views on the demand for the new iPhone 16 highlight the complexity and uncertainty of predicting consumer behavior in the tech market. While some see a disappointing start to the iPhone 16 cycle, others anticipate an AI-driven supercycle. What's your take on this? Feel free to share this article with your friends and discuss it. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.