Since I generated a number of comments in my post about iPhone 5c channel fill helping Apple Apple get to 9 million iPhones being sold I thought it would be worthwhile to look at the data from previous iPhone and iPad launches along with some information on the different number of iPhone 5c's that are available. (Note my family and I own Apple shares).
On its quarterly results conference call Apple has been providing how many iPhone and iPad units have been in channel inventory, by how many units it has changed and typically how many weeks of sales they cover. You can view transcripts of the conference calls on SeekingAlpha.com via this link.
What does make this iPhone launch different than previous ones is having two models available. With the iPhone 5c not replacing a current version it has to build up its inventory base from zero. While the company would plan for most of the initial units being built to be sold there will be some that will wind up being in channel inventory and if sales are less than expected it will be a larger number.
How much channel inventory has there been for iPhones and iPads
I have created a Google Google Doc that has this data that you can view via this link for the last four iPhones and three iPads to gauge how much channel inventory there has been. On average iPhones have had 27% and 24% of current quarter and next quarter sales in channel inventory, respectively, or 3.5 and 3.2 weeks of supply. The range has been 16% to 34% for current quarter sales and 17% to 35% for next quarter sales.
For the iPad it's channel inventory has averaged 20% and 17% of current quarter and next quarter sales in channel inventory, respectively, or 2.6 to 2.2 weeks of supply. The range has been 11% to 28% for current quarter sales and 9% to 33% for next quarter sales. While the iPhone is more appropriate for this analysis I've included the iPad as a check on the iPhone numbers.
There are more configurations available than ever before
The iPhone 5 had three models, the A1428 for GSM networks and A1429 for CDMA and GSM networks which came in two colors. It also had three memory options for a total of 18 combinations.
The iPhone 5c has five models, the A1532 for GSM and CDMA networks along with the A1456, A1507 and the A1529 being available in five colors. It has two memory options for a total of 50 combinations.
Just to fill out the iPhone 5 family the 5s also has five models with the A1533 for GSM and CDMA networks, the A1453, A1457 and the A1530 being available in three colors. It has three memory options so there are 45 total combinations.
The above information can be found on the Apple website via this link.
Overall the more configurations that a product has should drive additional inventory. However as Apple gets actual sales data it should be able to tune in the inventory levels to its desired levels.
Some of the key questions and assumptions to determine channel inventory are
- How fast can Apple's suppliers ramp production?
- How many iPhone 5c's does Apple think it can sell?
- What is the ratio between 5c's and 5s'?
- Will Apple want to have between 4 to 6 weeks of 5c's in inventory?
Calculation for how many 5c's are in channel inventory
I've created a calculation that depending on how many iPhones you believe will be sold, what percentage of sales will be 5c's and what percentage of a quarters sales will be in channel inventory to try and determine how many that will be. This calculation is also in the Google Doc at this link.
If you assume that
- Apple sells 50 million iPhones in the December quarter (it sold 47.8 million last year)
- The 5c accounts for either 20% or 25% of all iPhone sales
- And it has about 3. or 3.9 weeks of inventory
- Then there should be 2.5 to 3.75 million 5c's in inventory.
- If you increase the unit sales to be 60 million
- But drop the percent of sales for the 5c to either 17% (1 of every 6) or 20% (1 of every 5) and
- Drop the number of weeks to 2.6 to 3.3
- Then the amount of channel inventory becomes 2 to 3 million 5c's.
Therefore depending on how fast Apple's suppliers can ramp production it seems reasonable that there could be 2 to 3 million or maybe even more in channel inventory, especially if the 5c was selling below expectations which is my belief given its 24 hour lead time. This is below the 3.5 million that Gene Munster wrote about but based on these assumptions there could be millions in 5c channel inventory.
Follow me on Twitter @sandhillinsight. Find my other Forbes posts here.
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