Apple scoops up iPhone upgraders, despite supply chain woes

Apple’s iPhone 13 has successfully impressed millions with older iPhones to upgrade to the all-new model. Demand seems high in all major markets, and while the supply chain is creaking with COVID, suppliers are prioritizing iPhone production.

Follow the money

Manufacturers recognize that despite Apple’s famously tight margins they reliably make more money from making its products than manufacturing for others.

Citing “sources”, Digitimes tells us that, “Taiwan-based makers of VCMs (voice coil motors), wire winding and other components of smartphone-use lens modules are giving priority to production for Apple, amid strong pre-sales of iPhone 13 series in China and Taiwan.”

That report also claims sales of other brand smartphones have fallen short of expectation, noting that in some markets Apple has grabbed much of Huawei’s market share.

They just can’t make them fast enough.

Supply chain challenge

The manufacturing problem is part meeting huge demand, and part due to COVID and its continued impact across the Apple supply chain.

For example, in Vietnam, camera module suppliers are struggling to meet Apple’s needs as they are enduring severe restrictions because of COVID.

“Assemblers can still produce the new iPhones, but there’s a supply gap [in] that the inventories of the camera modules are running low,” a source told Nikkei Asia. “There’s nothing we can do but to monitor the situation in Vietnam every day and wait for them to ramp up the output.”

Similarly in China, Apple’s suppliers have suffered unexpected reduced capacity following state-mandated energy-related production stoppages in key Chinese cities. If this continues, the effect could be serous, given this is where many of the printed circuit boards and raw materials used in iPhones come from, a report said. The unpredictability of all these COVID impacts remains a nightmare for every manufacturer, turning ‘just in time’ supply chains into ‘might be late’ routines.

But demand seems strong

Servicing mass market demand at Apple’s scale is always hard. Lead times have now slipped to up to five weeks in key markets, and the device is about to be made

available to additional nations, including mobile-crazy South Korea.  iPhone 13 goes on sale there in early October, placing Samsung under some pressure to shore up its home game.

The Korea Herald notes: “There was demand from Korean customers of the Apple smartphones who have been waiting for a new 5G model, so the new option of the iPhone 13 would meet the pent-up demand,” citing a smartphone retailer sales person. One thing that might boost local demand may be the introduction of support for Apple Pay, which isn’t available yet in that country.

These features are brilliant improvements for older iPhone users

Apple keeps them loyal

The smartphone market remains dominated by three primary brands: Samsung (18.2%), Apole (15.1%), and Xiaomi (16.8%), but only the latter two have seen market growth in the last year, according to Strategy Analytics. Analysts all agree that while some Apple-watchers continue to moan about innovation, Apple is successfully courting its real key market of Android switchers and existing users of older devices seeking out an upgrade.

The MBLM data shows that people became even more loyal to Apple over COVID.

Most people don’t spend $1,000 on a new smartphone every year.

They use them for as long as they can and then seek an upgrade.

When you look at a new iPhone you should compare it to models three or more years old, and on that metric the iPhone 13 is a quantum leap in comparison to the iPhone XS, iPhone 8 and older. When compared to the iPhone XS, 13 delivers huge performance gains, far better graphics, vastly better battery life and a much more sophisticated camera – and costs $100 or so less as well.

For those users it’s a brilliant deal.

There’s a reason Apple likes to talk about its customer satisfaction data, and that reason is because rankings of that kind are what turns one-off customers into regular repeat business. People who have enjoyed using their old iPhone have seen how well received the iPhone 12 became and are willing to stick to Apple with iPhone 13 now it’s time to upgrade.

Up next

One way Apple will be able to maintain this momentum will, of course, be with the introduction of compelling services built around 5G. Which the company will inevitably be planning – along with a promised major redesign for the device, but (for me at least) the jury remains out on when that may be introduced.

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