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Ming-Chi Kuo says iPhone XR demand is weak, cuts sales estimates for Q1 2019

Blue iPhone XR and white HomePod

Ming-Chi Kuo has cut his expectations for iPhone unit shipments after the holiday season, citing the lower iPhone XR demand is a sign that the iPhone's sales are likely to decline heftily on an annual basis.

In a note to investors seen by AppleInsider, Kuo has trimmed his prediction for iPhone sales in the first calendar quarter of 2019, Apple's second fiscal quarter, to between 38 million and 42 million units. This represents a reduction of between 8 million and 12 million units lower than the same period in 2018, equating to a drop of between 16 percent and 24 percent.

TF International Securities' previous forecast for the period was between 47 million and 52 million units.

Kuo writes there is to be lower-than-expected demand for the iPhone XR, with forecast demand estimates in the quarter revised down from 20 million to 25 million units to the new estimate of between 15 million and 20 million units.

The increase in orders for older iPhone models is also recognized by Kuo, but it is advised the sales "cannot offset the decline of XR and XS series shipments because of the low season impact."

While 2018 shipments are estimated to hit between 205 million and 210 million units, 2019 shipments are tipped to decline between 5 percent and 10 percent year-on-year to between 188 million and 194 million units. Kuo believes the lower-than-expected replacement demand is impacting the sales of the current-generation models.

Furthermore, Kuo suspects iPhones shipping in the second half of 2019 are unlikely to increase sales, under the belief they will not include any "major upgrades."

While shipments will be lower, Kuo believes revenue from iPhone sales could still grow in 2019 due to higher average selling prices (ASP), helping increase revenue year-on-year until the third quarter and offsetting the decline in shipments.

The note continues one released in November by Kuo, which had cut iPhone XR shipments for the next year by 30 percent to 70 million in total, in part caused through the potential trade war between the United States and China, as well as consumers waiting for the iPhone XR feature set to become more affordable in another year.

In October, Kuo offered predictions that the demand for the iPhone XR would be better than expected, with Apple producing around 38 million units for holiday sales and the model potentially defeating "low seasonality" after the holiday quarter.

Kuo joins other analysts and firms who have cut their estimates and price targets in recent weeks, citing issues with iPhone saturation, a general slowdown of the smartphone market, iPhone demand in China, and the US-China tariff fight, among other reasons.