Apple (AAPL, Financial) shares fell about 2.5% in the last two days as Analyst Ming-Chi Kuo scaled back his estimates for iPhone 16 production by about 10 million units, hitting the standard model more than the Pro model. The estimated potential production for the second half of 2024 is now lowered to 84 million units from a previous estimation of 88 million. Some of this is simply sound business practice to better match the range to emerging consumer demands for ‘top-of-the-range' vehicles.
According to Kuo, the order cut was due to a worse product mix expected in the first half of 2025 and uncertainty about iPhone revenues. This comes in line with expectations of the release of the iPhone SE 4, which, although usually cheaper, does not receive an annual update, which might change the balance in the market.
However, Kuo also expects Apple's on-device AI to have a long-term future, and he has speculated that the company might eventually push ‘Apple Intelligence' as a paid service. Based on reports, this specific AI feature is due to come out with iOS 18.1 and is capable of summarizing text and composing replies on specific iPhone models.
This change in the production and innovation strategy focuses on the current market, in which Apple maintains flexibility in using AI and other enhanced features in its gadgets. Even after observing the market response, Apple's changes seem like a strategic plan to work towards a closer fit to the market needs.
