Foxconn, Apple’s primary iPhone assembler and the company’s biggest manufacturing partner, reported December revenue that was up 50 percent year-on-year, largely driven by iPhone X orders. The strong performance was enough to put Foxconn’s revenue up 8 percent on the year, reversing a trend of falling revenue for the company.
The strong results, which indicate healthy iPhone X demand, are a cause for hope for Apple watchers ahead of today’s earnings announcements. Recent reports have suggested that Apple has had to cut iPhone X production thanks to sluggish sales, but those rumors don’t line up with Foxconn’s explosion in revenue.
Over at Seeking Alpha, Mark Hibben extrapolated from the “unusual” pattern of revenue showed by Foxconn to work out iPhone X sales and revenue:
“On the basis of Hon Hai’s revenue bump, I estimate that Apple sold approximately 16 million iPhone Xs in the December quarter, for revenue of $17.2 billion. This puts the rumored production cut back to 20 million in calendar Q1 into perspective. If Apple sells 20 million iPhone Xs, this represents a net increase compared to calendar Q4, and a 16.6% cutback in production compared to a 24 million/quarter run rate.
Although some may see the 16 million in iPhone X sales as a disappointment, I believe that iPhone X sales have been largely additive to normal iPhone December revenue. Based on Hon Hai’s calendar Q4 revenue, which has been closely correlated with iPhone sales for the past few years, I have concluded that iPhone revenue will be about $70.3 billion, a y/y increase of 29%.”
While supply chain rumors have painted a negative picture of iPhone X sales for the last two weeks, most of the third-party sales data weve seen has been positive for Apple so far. Recent data from Kantar suggested that the iPhone X cracked the top-three bestsellers list in every important market, and was even the best-selling device in urban China.
Right now, most of the pessimism about Apple’s earnings is related to supply chain rumors that Apple has cut its iPhone X orders for Q1 2018. It’s possible that there’s a smidgen of truth to that — for example, Apple might’ve over-ordered in Q4 2017, causing that bump in Foxconn revenue — but it’s worth remembering that this has not been a normal iPhone production schedule. Apple’s manufacturing partners had to produce three new iPhones last year, rather than two, and the delays and yield problems with the iPhone X could have caused irregularities in the supply chain, which some industry watchers could interpret as problems.
Luckily, we don’t have much longer to wait. Apple reports its earnings after the markets close this afternoon, and we’ll finally be able to call the iPhone X a success or a failure.
