Loop Capital: iPhone SE Production Drops Because Nobody Likes Small Phones

05 APRIL 2022 - Another financial analyst has gone all gloom-and-doom on smaller form factor iPhones. Seeking Alpha has Loop Capital analyst John Donovan beating up hard on iPhone 12 mini, iPhone 13 mini, and the very recently released, third-generation iPhone SE. He thinks Apple has cut or is cutting production of its most budget-friendly phone by 20-million units. Donovan’s not the only one to make such claims. Last week, both the Japanese business publication Nikkei and TF International analyst Ming-Chi Kuo reported similar, significant cuts to SE production. Donovan doesn’t think iPhone production will be down 20-million, though. He thinks Apple will increase iPhone 13 production by about half that, as folks go for bigger phones.

As for what’s slowing phone sales, Donovan cites the war in Ukraine, “supply chain disruptions, and other usual rationale…” Really though, he just thinks people aren’t into smaller phones. Quoting Seeking Alpha:

Following the “dismal” results of the iPhone 12 Mini and iPhone 13 Mini, Donovan believes that Apple (AAPL) has finally realized that smaller iPhones have “limited appeal” and given the wide availability of the iPhone 13, the iPhone SE is unlikely to sell well.

And yet Apple keeps making them. If we assume a major appeal of iPhone SE is its relative affordability, and we agree that inflation and higher fuel prices hurt most the people with least - it may not be as much about whether the phone is popular, but whether the folks at whom it’s aimed can or will afford it right now.

Or maybe Apple keeps making small amounts of small phones because, while the audience may be smaller, its money still spends. Or maybe Apple’s just dumb.