So This Guy Walks Into an iPhone Store

Reports and rumors of demand both look increasingly bearish.
At Closing, April 19th
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Apparently Apple's latest gadget may not be selling that well. I know, shocking.

According to a guy who knows a guy who said he saw a report written by someone who heard from somebody, sales of the iPhone 7 are down about 25 percent on an annual basis when compared to last year's iPhone 6s. This game of Chinese whispers apparently originates from researcher GfK and is based on data from Asia and Europe. It was reported by Business Insider, who spoke to someone who saw it.

Wonderfully enough, GfK went about as close as it could to confirming the data with this reply to Bloomberg News last week: “We did not publish these figures for external release.”

Beyond Apple itself, the other big company that's betting on the success of the iPhone 7 is Foxconn, which gets more than half its $142 billion in annual sales from Cupertino. It's not an exaggeration to say that if Apple sneezes, Foxconn catches a cold, with proof coming in the form of slowing sales at Foxconn's flagship Hon Hai.

Is It Half Empty...

Shares of Foxconn's Hon Hai unit have typically fallen in the 20 trading days after the release of a full-cycle iPhone

Source: Bloomberg

So far, stock in Hon Hai has climbed 1.94 percent since the iPhone 7 went on sale. That's the best start for a full-cycle iPhone since at least the iPhone 4 in 2011. Interestingly, it's still eclipsed by strong post-launch climbs after the half-cycle iPhone 4s and iPhone 5s. This apparent dichotomy can perhaps be explained as a mismatch in expectations. Even before the iPhone 7 came out, the talk was largely negative, with most people dismissing it as not being different enough from prior models to spur users to upgrade.

Apple's slick presentation, backed up with some early data from phone operators, helped investors get caught up in the fanboy euphoria. But reports of a GfK report have now rained on that parade.

... Or Half Full?

Half-cycle iPhones, carrying the 's' moniker, have done better for Hon Hai's shares than full-cycle models

Source: Bloomberg

Backing up the concerns raised by this possible GfK report is some innovative research published by Smartkarma from independent analyst Edison Lee. By visiting Hong Kong's Sin Tat Plaza, famous for its cluster of phone retailers, Lee this past weekend was able to measure the market for iPhone flipping, which is when people buy iPhones merely to resell them unused to retailers. His conclusion:

Excitement about iPhone 7 is dying down rapidly.

Backing up this claim is his data, which shows the resale price of a Jet Black 256Gb iPhone 7 Plus fell by 38 percent in the space of just one week. Whereas once the device was fetching an average HK$21,000 ($2,700), now it's HK$13,000 -- a mere 56 percent premium above Apple's official price. That premium is only possible because the device isn't available at Apple's online store.

Conflicting signals were seen for other models, with the Rose Gold 32Gb iPhone 7 fetching 2 percent more than the prior week. Yet, according to Lee, more and more shops in the plaza have completely stopped buying the iPhone 7, and crowds have died down markedly.

Of course, anecdotes by one person at one mall in one city can't tell the full story of the $155 billion annual market for Apple's coolest gadget. But with the chatter so bearish, it's hard not to think investors have been suffering a little iPhone fever.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Tim Culpan in Taipei at

    To contact the editor responsible for this story:
    Katrina Nicholas at

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