Big Cuts Seen In Apple's (AAPL) iPhone Prodution and iPad Numbers Appear At Risk

May 17, 2011 9:52 AM EDT Send to a Friend
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Analysts at FBR Capital are creating a stir in techland Tuesday after taking down their Apple (Nasdaq: AAPL) iPhone production estimates dramatically and suggesting supply constraints could make Apple's internal iPad estiamtes unachievable.

According to the firm's contacts, 2Q11 iPhone production estimates were revised downward by 3.9 million units or -16%, from 24.0 million units to 20.1 million units, primarily due to lower than expected CDMA iPhones sales through Verizon (NYSE: VZ), and due to some spotty iPhone component supply in early May.

For 2Q11, CDMA iPhone units were revised downward by 58%, from 5 million to 2.1 million units.

For 3Q11, the firm's contacts see total iPhone production remaining flat at roughly 20 million units, with 8 million of these units being the long awaited iPhone 5, 1.8 million units being CDMA-based iPhone 4, and 10.3 million units being traditional iPhone 4 devices.

For the the still secret iPhone 5 (codenamed N94), contacts have confirmed to FBR that Qualcomm (Nasdaq: QCOM) is replacing Intel (Nasdaq: INTC) as the baseband supplier, selling an integrated CDMA/WCDMA baseband that allows Apple to streamline production. The iPhone 5 will also use an 8MP camera with OmniVision'S (Nasdaq: OVTI) CMOS sensors, with Sony (NYSE: SNE) possibly being a backup image sensor supplier in 2012.

In total for the 1st-half of 2011, FBR now sees 43 million iPhones built. This suggests Apple will build about 90 million phones in 2011, down from the firm's previous estimate of 100M-105 million.

For iPads, device builds remain constrained due to the Japan earthquakes. The firm maintained their Q2 iPad builds at 6.2 million, but sees a 1 million drop in Q3 to 5.2 million due to the Japan issues. The firm said, "Unless something were to change dramatically, Apple's internal iPad production goal of 40M-45M units for 2011 now seems out of reach."

Commenting on implications for for Broadcom, Qualcomm, and Intel the firm notes:

  • Qualcomm implications: Baseband win driving incremental growth! We believe that Qualcomm will replace Intel/Infineon’s baseband solution beginning in the next iPhone, which will likely include an integrated CDMA/WCDMA baseband solution that will allow Apple to address more carriers without changing the phone’s hardware specifications (a world phone

  • Intel implications: Loss of 15M basebands drives a $120M impact, or roughly 1% of revenues. For Intel, while losing the iPhone baseband socket to Qualcomm is an incremental negative, in all likelihood this socket transition was already underway before Intel bought Infineon's wireless unit.

  • Broadcom (Nasdaq: BRCM) implications: Near-term Apple revenue contribution roughly flat and contributing to Broadcom's lack of near-term growth. For Broadcom, which supplies the Bluetooth/WiFi/FM connectivity combo chip and a GPS chip, Apple production cuts represent a near-term headwind.


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