Apple conducted its annual product line-up event this week, tagged as “Wonderlust.” In addition to new product hardware and some services announcements, the lead up to the event has provided some supply chain related news.

New iPhone Lineup

As widely expected, the company unveiled a new Apple iPhone15 line-up that includes four models: iPhone15, iPhone 15 plus, iPhone 15 Pro and the iPhone 15 Pro Max as the top model.

The designated base model iPhone 15 and 15 Plus will feature aluminum cases similar to last year’s iPhone 14 and Plus models. The 15 Pro and Pro Max models have their case edges moving to a titanium composition vs. that of stainless steel. The higher end 15 Pro line-up will be populated with a faster A17 processor produced in a 3 nanometer fab production process by Taiwan based contract fab producer TSMC. The  base level iPhone 15 and plus models inherit the slower A16 processor utilized by last year’s iPhone 14 Pro models.

All of the four new 15 models will feature USB-C charging and data transfer ports as contrasted with the prior Lightening port that many Apple users are familiar with. This change was necessitated by a ruling by EU regulators that Apple’s Lightening port placed an undue burden on European smartphone and consumer electronics users where USB-C has become an accepted standard for multiple branded consumer devices.

Reportedly, Apple is offering a Lightening to USB-C converter cable for existing iPhone or other Apple hardware users, but at a cost of $29. The Lightening port was first introduced with iPhone 5 in 2012.

Pricing Strategy

Relative to overall pricing business and industry media reports note that this year, Apple has avoided across the board price hikes in the U.S. market for the new iPhone lineup. However, there are price hikes involving certain model iPhone 15 phones sold in China, India and Japan to reportedly offset currency value changes related to the U.S. dollar. Reportedly, Apple cut the price of the older iPhone 14 model specifically sold in China to spur product demand of that model.

Many industry watchers are viewing this current pricing strategy as an acknowledgement that consumers remain economically stressed and that incremental improvements in the product lineup are not going to be able to justify added price hikes for smartphones. In its reporting, The Wall Street Journal cited data from Counterpoint Research indicating that: “Since 2019, the company has boosted iPhone revenue by more than 44% despite shipments only advancing 15% in roughly the same period.” The inference is that pricing strategy is compensating for declines in iPhone demand. In the most July ending quarter, Apple reported an overall 2.4 percent decline in iPhone revenues.

Manufacturing Support

Contrary to the past 2-3 years, the shipping for all four of the new iPhone models is consistently communicated as September 22, with pre-orders now being accepted.

In prior years, especially last year, component availability, Covid-19 related restrictions among Foxconn’s production facilities in China  and added logistics disruptions had the effect of delaying the availability of some new model versions until very late in the holiday fulfillment cycle.

A further change from last year is that final assembly production located in India as well as China, will be jointly supporting order fulfillment for either the new product or older product line-up. In a posting in April, Supply Chain Matters highlighted a Bloomberg published report indicating that upwards of $7 billion of iPhone product output had been supported by India based assembly facilities.

New Apple Watch Lineup

Two news models of the market popular watch were announced: the Apple Watch Series 9 as well as an updated version of the Apple Watch Ultra.

The premium Ultra will reportedly feature the use of recycled metals as a contribution to the company’s sustainability commitment efforts. The use of leather watchbands has also been eliminated as part of that effort.

Both watches will benefit from a higher speed processor chip, the new U2 ultra-wideband chip for more precise location, along with reported sensor and internal component upgrades.

There have also been reports that Apple is evaluating and testing the use of 3D printing for production of the stainless steel chassis of some of these new Apple Watch models. According to a published report by Bloomberg, citing informed sources, this method is being utilized in effort to both lesson the overall use and potential waste of metal in the watch case fabrication process along with ascertaining if 3D printing methods can be effectively utilized for other product models as well. According to the report: “Apple and its suppliers have been quietly developing 3D printing techniques for the past three years.” Apple has declined to comment on these reports.

External Geopolitical Developments

What is also capturing the attention of Wall Street and Apple investors are recent reports indicating that Chinese government agencies are reportedly increasing the banning of the use of iPhones among deemed sensitive government agencies as well as state-owned companies or government controlled organizations. While there is reportedly no stated or written directive, as yet, the effort is believed to be associated with the ongoing trade tensions involving China and the U.S. restrictions on companies selling advanced technology to China’s high tech companies.  Other reports in China point to government agencies identifying a security issue specifically involving iPhones.

A further backdrop development has been the recent announcement by Huawei Technologies of a new smartphone offering that contained an advanced processor produced internally in China, despite the harsh sanctions on U.S. exports of advanced semiconductor technology.

China itself represents Apple’s third largest market and accounts for a reported 20 percent of Apple’s total sales.

Investors and industry watchers are speculating as to whether the “symbiotic” relationship that Apple has had with Chinese officials may be fraying.

An unstated but perhaps other consideration might be the effects of Apple’s ongoing China Plus supply resiliency strategy in sourcing production to other Asian areas such as India and Vietnam, amid increased economic uncertainty and growing manufacturing related employment involving younger Chinese workers.

 

While Apple’s revenue and profitability strategies are increasingly being supplement by the sales of added content and other services, new hardware models need to be the engine for added sales and additionally services related growth with higher margins. Thus, global supply network strategies, product innovation and market agility remain fundamental for spurring growth, especially in markets where consumers are cutting back on product related spending.

 

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