Where have all the iPhones gone?

Ted Todorov · 04-01-2008, 10:14 AM

Apparently iPhones are gone from many (most?) Apple Stores nationwide, and apple.com is showing them as 5 to 7 days shipping. While the sell out was confined to NYC, I thought it was just foreign visitors taking advantage of the nearly worthless dollar, but now I'm mystified. Possibilities:

3G iPhone coming much sooner than anyone expects?

Sudden demand spurt that Apple totally failed to anticipate? (All those iPhone SDK developers buying test phones, no doubt

)

Component shortage a whole year into iPhone manufacturing?

Factories too busy making 3G iPhones to make enough 2.5Gs?

What do you think guys?

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ErichH · 04-01-2008, 12:59 PM

Apple is on the same release plan that's been known for months. June - If they decide to go before the conference, it would be strange. Expect a big deal event for 2.0 hardware.

It's only 60 something days away, so why not thin the channel.

Verizon has been calling me with all kinds of free crap if I'll re up my expired plan. When I mention the iPhone, I usually get a quick end to the sell. Nice

Ted Todorov · 04-01-2008, 01:26 PM

Quote:

Originally Posted by ErichH

Apple is on the same release plan that's been known for months. June - If they decide to go before the conference, it would be strange. Expect a big deal event for 2.0 hardware.

It's only 60 something days away, so why not thin the channel.

We are talking closer to 90 days if they release it post WWDC or on the 1 year anniversary. Anyway, even if it was just 60 days, it makes NO sense for Apple to kill their supply this far in advance. They would lose huge amounts of sales -- not to mention cheese off their existing customer base -- imagine losing your iPhone and then having to wait 2-3 months (or even a week!) to buy a new one?!?

There has to be a different explanation than deliberate supply constraint due to a June release.

Ronald Epstein · 04-01-2008, 04:18 PM

Even if the new iPhone is announced in June (which is expected)
I don't think we'll see the first 3G phone in stores till the fall.

Of course, wouldn't it be neat if the new phones were immediately
put on sale?

Ted Todorov · 04-01-2008, 09:59 PM

Quote:

Originally Posted by Ronald Epstein

Even if the new iPhone is announced in June (which is expected)
I don't think we'll see the first 3G phone in stores till the fall.

Of course, wouldn't it be neat if the new phones were immediately
put on sale?

They will be put on sale within days of the announcement, if not that very day. The iPhone is too crucial a product at this point for Apple to leave any kind of gap. The FCC will keep testing secret for a period of time, if asked to, so there is no reason to make the 3G iPhone public until right before the release. I'm sure something will end up leaking from the retail chain, so they might do the announcement slightly in advance, but just slightly.

And I think the 3G will go on sale in June, not in the fall.

Yee-Ming · 04-03-2008, 05:14 AM

Quote:

Originally Posted by Ted Todorov

And I think the 3G will go on sale in June, not in the fall.

If that's true, then I'm glad my friend wasn't able to buy an iPhone for me on a recent trip to the US (line in the Apple Store was too long).

Ted Todorov · 04-03-2008, 07:00 AM

Quote:

Originally Posted by Yee-Ming

If that's true, then I'm glad my friend wasn't able to buy an iPhone for me on a recent trip to the US (line in the Apple Store was too long).

I think we have a winner -- Yee-Ming has just pointed us to the one true reason for the shortage -- overwhelming purchases by visitors for export. My original thought was correct. Here is a comment from a poster naming himself Tantrum taken from the the NY Times Bits blog comment section:

Quote:

8. April 2nd,
2008
4:01 pm
Wall Street analysts like Gene Munster and Toni Sacconaghi continuously discount the role of international demand in iPhone sales. They do this primarily because they have a very America-centric view of the world in which this 5% tail wags the dog. Not in cell phones.

This is the issue. The customer-satisfaction numbers you see for iPhone in the US are no different internationally, in some cases they are much higher because the price ($399 and $499 is seen as perfectly reasonable, particularly in emerging markets used to paying higher premiums on US prices for BlackBerry and high-end Nokia phones).

Demand for iPhones outside the United States, particularly in emerging markets, is out of control and has reached the point where it has started to impact Apple’s normalized supply chain projections. It’s okay to have a delta of, say, 100,000 units or so per year between actual and forecast. International demand is driving that delta upwards of 1 million. That’s a whole different ball game for component sourcing, quality control and production ramp-up and some things are starting to come unstuck, even for a finely managed company like Apple.

What’s driving this?

1. Free, out-of the box -ready, GUI-based network unlock solutions like Ziphone and iLiberty. Confidence in these unlock systems has grown significantly over time as technical expertise required to use them has fallen.

2. A large, very organized procurement mechanism for iPhones, particularly into Russia, Eastern Europe, India and China. There are people who go from store to store buying iPhones and aggregating them for export to “resellers” overseas.

3. Proliferation of Wi-Fi penetration and the recognition that in GSM countries, iPhone works simply and well enough. Wi-Fi hotspot usage is growing significantly around the world and the iPhone’s superior web browser is taking full advantage to maximize customer experience. It’s the right product at the right time for the macro-trend.

4. The iPhone is relatively cheap to emerging market customers used to paying $500 for a BlackBerry and a cheap US Dollar makes it an even better deal. For example in Russia, at $499, a16GB iPhone translates to around 12,000 Rubles. An 8GB Nokia N95 costs $815 or 20,000 Rubles. The value-for-money perception with iPhone is absolutely huge.

5. Zero or minimal compatibility issues on GSM Networks. I have used my iPhone with SIM cards from 32 different networks in Europe and developing countries. It works seamlessly. The iPhone is a quad-band GSM phone, meaning that it supports all four major GSM frequency bands, 850 and 1900 MHz bands which are used in the Americas, and 900 / 1800 MHz bands used in most other parts of the world, making it compatible with all major GSM networks worldwide. 2 billion people around the world use GSM phones.

To give you an idea of international demand; There are Nigerians shipping more than 500 phones a week from New York to Lagos and Nigeria is a third world country. The EDGE internet works perfectly, albeit just as slow, there and data is very, very cheap at $5 per 100 MB of usage.

“Data-driven” analysts like Munster and Sacconaghi get misled by the laziness of long-distance US-chauvinist analysis into making market projections based on perfunctory GDP per capita statistics and “population living on less than dollar per day” figures. They look at the wrong data because they think the world works in the same way everywhere. This weak analysis disregards latent middle and upper income demand in developing countries. Income distribution in many emerging markets is extremely lopsided.

If you define a potential user as someone who can afford (or is used to) paying twice as much for an iPhone and double what an AT&T subscriber pays per month, there are at least 7 million potential iPhone users in Nigeria, 9 Million in South Africa, 80 Million in India, 25 Million in Russia, 25 Million in Brazil, 8 Million in Indonesia and 100 Million in China. Not all of them will be users but just 5% of this number is way more than 10 million. Considering mobile phones are some of the most universally adopted products on the planet, a good GSM phone reaches Iran and Iraq much faster than people on Wall Street can ever imagine. I predict iPhones will be available to elites in Cuba (which has both GSM and TDMA) within the next 30 days.

From research I’m conducting. we have conservative numbers of grey market as follows:
Russia 2000-4000 phones/week
China 4000 -6000 phones/ week

Demand from Western Europe is substantially slower but still significant, averaging anything from 2000 -3000 units/week from New York and other big cities with international airports. Now, not all the phones shipped from New York are bought in NYC but the export pattern is clear and very strong.

I have completely ignored the cash-flush Middle East where Dubai has always been a world-leading port in grey market clearing and forwarding for consumer electronics.

Conservatively speaking, something is sucking 15,000-20,000 iPhones/week out of the United States. If this phenomenon is coinciding with steadily growing adoption among US customers, suddenly the slack Apple had is drying up.

Many of the millions of visitors coming to the United States every month are going back with a packed iPhone in their luggage. It’s one of the things people are expected to buy when they come.

Foreign nationals are not very likely to buy iPhones at an AT&T store because the requirements are inconsistent (some stores requiring SSNs, existing phone numbers and/ or activation), queues are long (non-starter for people with a limited window to get back to the airport), lack of other Apple products (iPods etc) and accessories and simply, AT&T stores are not landmarks.

Finally, the reason why used iPhones will begin to show up on eBay and other consumer-to-consumer sites in Western Europe is because individuals who speculatively buy an iPhone to resell are up against “organized unofficial” suppliers and 3G is a big deal there. In emerging markets, you’re much more likely to buy a phone from an “expert hacker supplier” if you worry about fixes and other things. And yes, the parallel market is showing budding signs of getting sophisticated at providing some of the support Apple wont provide.

Oh well, maybe it’s just version 2.0 coming out soon.
I think not.

Bottom line: Apple has produced a product that is promising but short of the mark in 3G Western Europe, reasonably good for the US but a smash hit in emerging markets.

— Posted by Tantrum

ErichH · 04-03-2008, 08:32 AM

Yep - One look on ebay is all it takes to see how crazy the market is for unlocked iPhones. I can't say it's an unjust attitude considering AT&T's 2 Billion and counting LoveFest with Apple.

Hopefully, Apple will keep the price in line with current models
and not charge some insane price for the 3g. AT&T could make it even more painful by upping their plan price as well. The current 60 bucks for 450min is, in the words of my sales friend, `A Little Happy' or `They're rather proud of themselves'

Patrick_S · 04-03-2008, 06:37 PM

Quote:

Originally Posted by Ted Todorov

The FCC will keep testing secret for a period of time, if asked to, so there is no reason to make the 3G iPhone public until right before the release.

From my experience the notion that the FCC will keep testing secret is not accurate.

If the FCC does the testing it is public record from the get go. This is why a few large manufactures are actually certified testers (I doubt Apple is one) and others use private third party testers. That way they can submit the certification paperwork and basically pledge that the product will meet all of the standards necessary without letting competitors know all the specifics of the product. If I recall correctly the paperwork generally has to be submitted 100 days prior to launch.

BrianShort · 04-06-2008, 01:50 AM

If a 3G iPhone really does come out by June, I'll most likely pick one up. I may have a substantial amount of unexpected income soon and this would make a nice present to myself. I do hope the 3G can be turned off though... I don't have 3G available in my area, but would definitely like the feature for times when I am in areas that support it. I also hope that Apple reconfigures the headphone jack so normal headphones will fit without adapters.

ErichH · 04-09-2008, 12:54 PM

Apple is famous for audio/headphone jacks that only work with their stuff. As General Monroe says to Korben Dallas, Old tricks are the best tricks.

Todays tidbit - 3G iPhone's Upcoming Chip Found? | Gizmodo Australia

and - What S-GOLD3 Could Really Mean For the Next iPhone | iLounge Backstage

Seems like every 2-3 days there's a new rumble.

BrianShort · 04-10-2008, 03:35 AM

Quote:

Originally Posted by ErichH

Apple is famous for audio/headphone jacks that only work with their stuff. As General Monroe says to Korben Dallas, Old tricks are the best tricks.

Really? The iPhone is the only thing I know of that has this issue, though I've only started following Apple products closely for a few years. I sure hope the MacBook Pro I'm getting tomorrow works with a regular set of headphones!