Advertisements

Will the economy be so bad in six months that people won’t spend money on a new iPhone? Apple might think so.

Apple always announces its new iPhone in September, but 2020 could be the first time in eight years that changes.

The tech giant may be preparing to delay the release of the new iPhone, its most closely-watched launch of the year, because it’s worried that “the current situation would significantly lower consumer appetite to upgrade their phones,” according to a report from Nikkei Asian Review published last week.

The company’s top concern right now isn’t whether its supply chain will recover in time to produce the next iPhone; it’s whether there will be enough demand across the United States and Europe for Apple’s next smartphone, said a report from Reuters published just one day later.

Taken together, the reports suggest Apple is worried people may not be in a financial position to purchase a new 5G-enabled iPhone, which could cost around $1,000 if Apple’s previous premium iPhone launches are any indication.

The decision would come at a time when an unprecedented number of people are filing for unemployment in the United States, Apple’s biggest market, as the coronavirus has upended the way Americans work and spend their money. Nonessential businesses have been forced to close their doors in at least 30 states, and the outbreak has sent ripples through the airline and restaurant industries as people are urged to stay home unless absolutely necessary.

If Apple is indeed considering delaying its next iPhone launch because it believes many people won’t be in a position to purchase it, that may be very telling when it comes to what the US economy will look like six months from now.

Apple’s moves during the coronavirus outbreak have indicated that the company has been one step ahead of the situation as it unfolded in the US and other areas of the world.

For example, Apple made the decision to close its retail stores outside of Greater China days before states in the US began issuing lockdown and stay-at-home orders. (California was the first state to order residents to stay at home on March 19, with other states like Connecticut, New York, and Illinois soon following.)

The iPhone maker also restricted employee travel to Italy and Korea on March 3, days before the number of new daily cases in Europe and areas in Asia outside of China began to increase significantly.

That may be because Apple’s reliance on China has made the coronavirus a concern for the company from the very beginning, long before it arrived in the United States. Questions about how the virus could impact Apple’s business had emerged as far back as late January when the topic came up on the company’s fiscal first-quarter earnings call, more than a month before the pandemic would upend daily life and business in the US.

The coronavirus’ impact and spread has been difficult, if not impossible, to predict from the start. The staggering jobless claims of 3.3 million for the week that ended on March 21, far higher than the expected number of 1.5 million, is one of the latest indicators of that.

New jobless claims in the United States spiked to 3.3 million for the week ending March 21.
Business Insider / Andy Kiersz

Predictions about how and when the economy could recover from coronavirus-induced slumps vary. The most optimistic projections call for a V-shaped recovery, in which the economy would bottom out for only a short period before sharply bouncing back, as Markets Insider’s Ben Winck recently reported. But a worst-case scenario could involve an L-shaped trend, which would signal a sharp decline followed by an extended period of sluggish economic activity.

However, the most likely scenario is probably a U-shaped curve, in which the decline and recovery occur gradually, Jack Janasiewicz, portfolio strategist and manager at Natixis Investment Manager Solutions, recently told Markets Insider.

Apple’s next-generation iPhone, believed to be called the iPhone 12, is perhaps the company’s most critical product launch in years. Expectations have been riding high for months, even before Apple debuted its iPhone 11 lineup in September. Analysts are predicting that support for 5G connectivity will provide a big enough incentive for shoppers to upgrade after years of more iterative iPhone launches. That said, 5G phones released over the last year have generally been more expensive than non-5G devices, like Samsung’s Galaxy S20 lineup, which could signal that faster connectivity could come at a higher price going forward.

With that in mind, it makes sense that Apple would delay the iPhone’s launch if it truly does believe that the economic fallout from the coronavirus could significantly hurt demand. Some analysts, like Wedbush Securities Dan Ives, are expecting the iPhone 12 to result in an upgrade “supercycle,” and pushing its launch could ensure that the iPhone 12 has the best possible chance at succeeding.

Source: Apple may delay iPhone 12 in sign of US economy, consumer finance worries – Business Insider