We revise down 1Q18 and 2Q18 shipments of iPhone X to 18mn units and 13mn units, respectively, lower than market consensus of 20-30mn and 15-20mn units. We expect iPhone X will go to end of life (EOL) around mid-2018 and that total life cycle shipments will be around 62mn units, lower than our previous forecast of 80mn units.
Kuo cites two reasons for weaker than expected demand in the China. First, consumers are waiting 24-26 months before replacing their smartphone, that's longer that the previous average of 14-16 months in Q4 2016. Second is a desire for larger displays. Many Chinese consumers recognize that the iPhone X offers less usable screen space than the 5.5-inch iPhone Plus, especially since many popular Chinese apps aren't compatible with the notched design of the iPhone X yet.
Kuo says that iPhone shipments will maintain year over year growth of 0-5% in the first half of 2018, mainly due to Apple's corrected supply chain share. Later this year, Apple is expected to introduce three new iPhones: a 5.8-inch OLED model, a 6.5-inch OLED model, and a 6.1-inch LCD model. These models are all expected to feature Apple's notched design and TrueDepth camera. Kuo says after these devices launch, Apple's 'real super cycle' will kick in.
We believe the addition of 6.5-inch OLED and 6.1-inch LCD iPhone models will boost Apple's market share in China, and that the US$650-750 6.1-inch LCD iPhone will make it easier for users worldwide to own a 3D sensing and full-screen design iPhone which offers an innovative user experience.
Overall, Kuo predicts iPhone shipments will grow 5-10% in 2018.