Our checks of 190 Apple Stores in the U.S. show that 61% of iPhone 8 SKUs were in stock (54% iPhone 8 and 68% iPhone 8 Plus) compared to a year ago when we measured 20% of iPhone 7 SKUs were available and two years ago when we measured 50% of iPhone 6S SKUs in stock. We found that average iPhone 8 world wide lead time on Oct 2nd was about 1 week (average of 1-2 weeks and 3-5 days from lead time table). We believe there are two factors contributing to the increased iPhone 8 availability. The biggest factor being the reality that this cycle is split between the iPhone 8 and the iPhone X. The second factor is the iPhone 8 and the iPhone 7 have similar components and manufacturing which improve availability. We note this year we measured availability of the most popular models: both the 64GB and 256GB, Space Gray, iPhone 8 and 8 Plus on AT&T, which we believe is representative of overall iPhone 8 and 8 Plus availability. See detail below.
Greater Availability Evidence iPhone 8 is Incremental. The iPhone 8 is the best phone Apple has produced, but only incremental to the iPhone 7. The material differences between the iPhone 7 and iPhone 8 include a faster processor, faster charging and the ability to charge wirelessly. However, fewer people want the iPhone 8 versus the iPhone 7. The good news is more people will buy the iPhone X than we previously expected (we believe 20-25% of iPhones will be the X), which carries a higher ASP and higher gross margins, and ultimately should lead to modest (1-3%) upside to Street estimates in CY18.
Lead Times Improving. We also track iPhone lead times on Apple.com. On Friday, September 15th Apple began taking pre-orders for the iPhone 8 and 8 Plus, and at that time Apple was quoting 1-2 week lead times for most configurations. When we checked on Sunday the 17th, we found that little had changed over the weekend (see our note here). This past Monday (Oct 2nd) we updated the lead times and found they improved, in particular for the 8 Plus. The iPhone 8 and 8 Plus worldwide improved from 1-2 weeks (Sep-17th) to 3-5 business days (Oct 2nd). There was one exception, the Space Gray iPhone 8 remained at a 1-2 week lead time. The lower iPhone 8 Plus lead times compared to the iPhone 8 suggests the consumers who previously opted for the larger form factor are waiting for the iPhone X.
Watch + Cellular Lead Times. We did similar Watch + Cellular spot checks on Friday morning, a more detailed check on Sunday the 17th, and revisited again this past weekend. All models quoted 3-4 week lead times with no exceptions (previously, the Silver Aluminum Case with Seashell Sport Loop was 4-5 weeks). Apple Watch accounts for 3% of Apple’s overall sales, but we believe adding cellular (despite the $10 per month up data up charge) will add about 2% to Apple’s overall revenue growth rate for FY18. We’re modeling for 15% revenue growth in FY18, inline with the Street.
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