Editorial: Latest IDC estimate of Q1 2019 iPhone sales 'highly inaccurate' to the point of 'embarrassing'
IDC is one of the market research companies that confidently reports quarterly shipments, market share and growth figures for PCs, smartphones and other products with an implied accuracy down to the tenth of a percentage point. But, the company's latest figures are "highly inaccurate" to the point of "embarrassing," according to well-regarded analyst Neil Cybart of Above Avalon.
In its Mobile Phone Tracker for the first calendar quarter of 2019, IDC estimated that Apple only shipped 36.4 million iPhones, which it stated was a 30.2 percent annual drop, whittling down Apple's share to just 11.7 percent of a total of 310.9 million global smartphones shipped in the quarter.
That figure put Apple in a distant third place behind Samsung's nearly 72 million units and Huawei's almost 60 million units. Because Apple sells only premium phones— as most analysts define as selling for about $400 or more— it's not surprising that high-volume vendors of mostly lower-end phones would be outselling Apple in terms of unit sales.
However, IDC's portrayal of more than a 30 percent drop in iPhone units over the previous year is nothing short of shocking. It's also, as Cybart noted on Twitter, not just "embarrassing" but "impossible to achieve given Apple's stated iPhone revenue." Cybart stated that "IDC isn't close with their iPhone unit sales estimate for the quarter that Apple just reported."
IDC isn't close with their iPhone unit sales estimate for the quarter that Apple just reported. Apple sold way more than 36M iPhones. Plug 36M into an earnings model & you will find out that number is impossible to achieve given Apple's stated iPhone revenue. Embarrassing for IDC pic.twitter.com/C3CwVClZto— Neil Cybart (@neilcybart) May 1, 2019
Apple stopped detailing its unit sales of iPhones and other devices in Fiscal 2019, but the company still reports revenues for each business segment. This week, Apple reported March quarter iPhone revenues of $31.051 billion, representing a 17.3 percent drop over the year-ago quarter.
The only way Apple could have seen unit sales drop as fast as IDC reported would be if buyers had suddenly upgraded to extremely expensive phones, driving Apple's Average Selling Price to above $850. That's absurd, and inconsistent with historical quarterly shifts in average selling price.
Apple's ASPs are extremely high in the industry, but not that high. In fact, iPhone ASP appeared to peak with the launch of the $999 and up iPhone X last year, reaching a few dollars shy of $800. This year, market data shows that Apple's sales were lead by iPhone XR, which starts at $750. There's no possible way Apple's ASP rocketed upward as Apple's product mix shifted to a model that cost three quarters as much.
Cybart estimated that Apple sold more than 43 million iPhones in the quarter, which wouldn't change Apple's third place position in global unit sales, but would represent a difference in unit sales that at least makes sense when compared to its reported decrease in iPhone revenues. Those sales would imply an iPhone ASP in the March quarter of about $722.
Wild contradictions between market data sources
IDC's, "embarrassing" estimate has already lead some commentators to jump to absurd conclusions. Jack Purcher of Patently Apple pointed to IDC's data and called it an "eye opener," even while contrasting contradictory data from Canalys— which estimated Apple sold 40.2 million iPhones.
Those figures differ by an incredible 3.8 million units supposedly sold within three months, with Canalys' estimate more than 10 percent higher. So Canalys, looking at the same industry, reported that Apple sold on average 8,888 more iPhones every day than IDC was able to count.
Cybart's model points to quarterly iPhone shipments that were more than 18 percent higher than IDC's. Clearly, they're not all close to being accurate! But IDC's figures don't even pass a basic smell test when looking at Apple's reported revenues.
Notably, the Canalys estimate of total smartphone shipments in the quarter is only 1 percent higher than IDCs. So IDC wasn't just counting phone sales differently. It clearly ran with non-sensical numbers for Apple that don't align with the actual revenue numbers Apple reported.
A major reason for IDC being so out of line with facts is that this year, it couldn't simply wait for Apple to report its actual shipments and then estimate the rest of the industry around Apple's numbers.
No other smartphone maker reports how many units they sell quarterly. When Apple was reporting units, it was the only company to do so. That enabled IDC and other companies to report estimates that appeared grounded in reality because, sure enough, Apple's numbers matched what IDC reported, at least in reports where IDC waited for Apple's figures.
Apart from Apple, no other smartphone makers break out their quarterly revenues from smartphones. That means market data estimates apart from iPhones are completely untethered to any real fact-checkable data.
Samsung, for example, reports revenues from its IM Mobile group, but those include not just smartphones but also PCs, netbooks, tablets, watches and everything else compatible to Apple's total sales, not just its shipments of Galaxy S phones and its huge volumes of low-end phones shipped to the third world to sell for $150 or less. That explains why two market research groups came up with shipment data for Samsung that depicted an annual percentage of change that differed by about 25 percent.
The only really strong data point that IDC and other market research groups have to anchor their phone industry data is now Apple's revenues, and IDC's data completely fails in that regard.
Beware of free gifts
IDC's subset of publicly reported data isn't designed to give away valuable free information as a public service. Market research groups sell their reports to companies for $10,000 or more, so when they issue free bits of public data, journalists should review these reports with some healthy skepticism and consider why they're getting free data that tells such compelling stories.
This is particularly the case because those stories are often wrong to the point of clearly not being just a mistake. There's a history of market data firms releasing bad data coached to make winners look like losers and losers look like winners.
In fact, that's a primary goal of these groups, as history shows beyond a shadow of a doubt. These companies even admit that they work, not to enlighten the public with free data, but to help their paying clients with "influencing consumer behavior and buying preferences."
The curious history of IDC, Gartner & Strategy Analytics' public data on Apple
We've caught IDC and other market research groups reporting estimated numbers that didn't align with Apple's actual data before, including massive underestimations of Mac sales as part of an overall misleading history of reporting in PC sales and of course in tablet sales.
IDC spent years spinning figures that tried to suggest that Apple's iPad wasn't really very successful and would quickly be sidelined by Microsoft Surface sales, and then painted a picture that iPad was being left behind by incredible sales of Android tablets. The company even retroactively shifted its reported tablet estimates by ten million units, quite clearly to create the impression that Apple's actual sales of iPads were falling behind an incredible surge in demand for Android tablets.
But that was never true, and that pretense was impossible to sustain as it became clear that Android tablets were not actually being used— they were curiously invisible in web analytics— and were doing nothing to shift buyers' interest in tablet apps or services. Last fall IDC was forced to acknowledge that Apple is clearly leading the tablet market "unabated."
This wasn't news to companies building software for tablets, who were quite aware of this reality long before IDC dropped its charade in portraying iPads as desperately suffering from "shrinking market share."
In 2014, at the height of IDC's "iPad is losing" narrative, and just before the company laid out its rosy prediction for Microsoft's Surface devices overtaking Apple, Microsoft itself exclusively released tablet-optimized versions of its Office apps for iPad far in advance of Android, despite IDC reporting that Android tablets had close to twice the "market share" of shipments. Pretty clearly, Microsoft wasn't fooled by IDC's public reports on the economics of the tablet market.
Purchaser's report on IDC's data gravely warned that "If IDC's statistic [on Q1 iPhone shipments] is actually correct  you'd have to say that Wall Street analysts are not being honest with their shareholders to not reveal this incredibly important statistic." It's easier to accept that it's IDC that is not being honest, or is otherwise purely incompetent.
He also stated that "if this was Samsung having dropped 23-30% in Galaxy phone sales they would have been mercilessly slashed in the press, making headlines around the world."
However, Samsung's phone shipment volumes did drop by that much this summer and nobody batted an eye. It wasn't just a marketing firm estimate. Samsung officially reported a 22 percent drop in mobile revenues and a 34 percent collapse in year-on-year profits. Counterpoint Research estimated that Galaxy S9 series shipments specifically "declined 24 percent in Q2 2018 as compared to Galaxy S8 series in Q2 2017."
Despite being clearly unaware of what's been happening in the mobile market, Purchaser reached the conclusion that "Huawei destroyed Apple's iPhone growth," confusing correlation with causation.
Huawei did appear to roughly double its smartphone shipments while Samsung's collapsed— particularly in China and other markets where Huawei can sell its phones— and at the same time that Apple's sales fell. But for Huawei to have caused Apple's dip is conjecture, not fact.
And in reality, Huawei's huge volumes of new sales couldn't have been largely poached from among Apple's potential buyers because there weren't enough missing iPhones to account for Huawei's sales growth. Further, some of Apple's "missing iPhone upgrades" disappeared in the US, where Huawei can't even sell its products. That's pretty basic math and logic.
There were, however, large decreases in sales of Samsung, Xiaomi and Oppo Androids that all sell in the same price range as Huawei's models. That makes it pretty clear that Huawei's rise is not something new and unprecedented in the history of Android phones. The commodity nature of Androids means that each year, the vendor offering the best or cheapest set of models sees huge swings up while their competitors see huge swings down, with little apparent impact on iPhone sales.
We have no data showing that vast numbers of iOS users are abandoning Apple's platform in any region. In fact, even in China, we know that Apple's installed base of iPhone users is remaining solidly stable— even growing slightly to closely rival Huawei in the last quarter, despite the reported surge in Huawei shipments globally.
Android shipment volumes can and do slosh dramatically between commodity producers without having any real impact or relation on Apple's sales, the same way that surging histories of "tablet shipments" once attributed to Samsung, or Amazon or to no-name "white box" vendors in China had and still have very little real impact on Apple's iPad sales.
Journalists need to take a more critical look at IDC's "embarrassing" numbers and not simply take them at face value. Microsoft didn't.