Apple Expected to Cut Production of iPhone, Peak Popularity of iPhone May Be Over.

Analysts Project Decline in Apple iPhone Sales Going Forward

The days of exceptional popularity of Apple iPhones may be over as the company is expected to reduce production levels of the highly-discussed device, some analysts claim. On the other hand, there are holiday sales ahead and Apple may enjoy at least another quarter of unprecedented success, other industry watchers believe.

Production of Apple iPhone to Drop by 40% in Q4 – Analysts

“Previous checks indicated that iPhone production would fall about 10% sequentially in calendar Q4, but our new checks indicate that iPhone production could fall more than 40% sequentially in Q4,” said Craig Berger, an analyst with FBR Capital Markets, in a note to clients, reports Reuters news-agency.

Apple sold 6.9 million of iPhone smartphones in Q3 2008 thanks to expansion of Apple iPhone 3G into 51 countries, but the question is whether the company can be as successful going forward selling its handsets at price-points (the final price end-users have to pay according to the terms of contracts) that well exceed even the premium-class mobile phones by companies like Nokia.

In Q4 2008 there will be holiday selling season as well as expansion of Apple iPhone 3G into 15 other markets. But carriers have about 2 million of iPhone devices in inventories and the initial rush for the products is over, claims Needham analyst Charlie Wolf, reports Barron’s Online. That fact “suggests that iPhone sales might decline in the December quarter”, even though the expansion into new markets could provide some offset.

Still, Mr. Wolf believes that the “iPhone could effectively take over the smartphone market” if Apple lowers pricing of its device that is presently adopted by fans or gadget lovers.
Sales of Apple iPhone Could Hit 8 Million in Q4

There are also those who believe that actual sell-through figures of Apple iPhone in Q4 2008 may exceed those in Q3 2008, although such claims hardly look realistic in current market conditions.

Rethink Research suggests that back in the third quarter Apple and AT&T sold about 2.4 million iPhones, whereas 2.5 million were sold through by Apple’s partners outside the U.S. The market tracking firm also believes that approximately 2 million were still in stock across the world in late Q3 2008. While Rethink admits that sales of Apple iPhones in the USA will drop because of economic downturn, it believes that there will be no impacts of financial crisis in countries like Argentina, Brazil, Greece, Hungary, India, the Philippines, Poland, Russia, South Africa and Turkey for Apple, which will result in double the sales of the iPhone gadgets.

“If only 2.5 million actually shipped last quarter to customers outside the U.S. then the chances are that even without Christmas coming (it is not celebrated in all of these countries), this would still double, as advertising begins to bite in each of these countries. So make that 5 million, plus another million for stacking the retail channels. Under those conditions, even if AT&T only sells half the number as the recession bites harder there, the last quarter of the year will still outstrip the September quarter with well over 7 million iPhones. A more reasonable number would be closer to 8 million,” a report by Rethink suggests.

Still, even the optimistic Rethink Research claims that in Q1 2009 iPhone sales will, perhaps, collapse, falling back to 3.5 – 4 million units per quarter, which is inline with predictions by FBR and Needham.

iPhone’s Indian Reception: Small But Enthusiastic

Maharajas, rich kids, and entrepreneurs: so that’s who’s buying the iPhone in India, according to a Reuters report from the front line, which found that the launch of the iconic handset in India had “none of the mass hysteria” that accompanied its debut in the US, Europe and other parts of Asia in July.

Priced at $700-$800 in India, or twice the monthly salary of a white collar middle manager, the iPhone response was predicted. Still, it was an “enthusiastic reception,” and for those who can afford it, the phone gives them bragging rights in a country where mobile phones are still seen as “symbols of status and success,” and where the phone has already enjoyed a strong run in the black market. As 14 year-old high school student Rudra Khurana, standing in line with his father, said, “I can’t wait to show it off at school, it’s way better than having a PlayStation.”

Why The iPhone Has Stumbled In India

The original iPhone generated a lot of interest in India, selling well on the grey market, so it went to reason that when the 3G version launched officially in the world’s fastest growing wireless market, that it too would sell well. But apparently, that’s not what happened, with sales of the iPhone 3G falling far short of Apple’s own internal goals of moving 100,000 units by December 2009. Livemint.com reports that analysts tracking the Indian handset market estimate that half that number has been imported, with just a fraction—11,000 phones—sold so far. Given that every handset marker from the market leader Nokia (NYSE: NOK) to up and coming HTC have been anxious to capture the rapidly expanding Indian market, it seems odd that Apple (NSDQ: AAPL) hasn’t taken sales in the country more seriously.

So what hurt the iPhone 3G’s uptake in India? For one, pricing was always going to be part of it. At $800, the gadget was without a doubt, expensive, especially considering a typical IT worker’s annual salary ranges from $12,000-$24,000. But cost isn’t the entire reason. As Livemint points out, Nokia’s N96, Samsung’s Omnia and BlackBerry Bold all cost even more than the iPhone.

“Pricing communication” was a bigger reason. Indian consumers were well aware that the iPhone was selling in the US for $199, but Apple made no attempt to explain the sizable cost difference—that subsidizing handsets isn’t common practice in the Indian market as it is in the US. Even worse, the phone was locked to the carrier, despite consumers being charged full price. Apple also left too much to its operator partners—Bharti Airtel and Vodafone—which didn’t have the experience of aggressively selling handsets. They only sold the phones in their own stores, instead of branching out to the numerous retail phone outlets in India that sell 50 percent of all handsets. Marketing was another downfall. Again, it was left to Vodafone (NYSE: VOD) and Airtel, which didn’t push the phone that hard, and certainly didn’t position the iPhone as a “lifestyle” product, or make it seem “aspirational.” (Apparently, selling the iPhone as a lifestyle product could have compensated for the fact that India doesn’t yet have 3G networks, rendering the phone’s 3G capabilities useless).

Nokia, meanwhile, will be happy to learn that Apple’s strategy “was not to sell a million phones in India” and that “it only wanted to establish a presence in the country,” as Airtel’s CMO Sanjay Gupta told Livemint. Nokia dominates the Indian smartphone market, with research firm Gartner estimating they have an up to 70 percent share of it.

In a separate story, Reuters reports that India added a record 7.7 million mobile users in October to its GSM-based networks, according to the Cellular Operators’ Association of India (COAI). Total GSM mobile users at the end of October numbered 241.4 million, up 3.3 percent from 233.7 million in September. The number does not include India’s CDMA mobile users. At the end of September, number two network Reliance Communications, which is CDMA-based, had 56.1 million users.

iPhone 3G coming soon to Egypt through Vodafone

Apple's iPhone 3G will soon be available in Egypt, and Vodafone Egypt is reportedly gearing up to be the first mobile operator to sell the high-tech gadget in the Arab world's most populous country.

Customers nationwide can pre-register online and be notified when the phone arrives to Vodafone Egypt's stores, according to a telecom source who spoke on condition of anonymity because they were not authorized to speak to the media.

Vodafone — the world's leading international mobile communications group – sealed a deal with Apple in May to bring iPhone 3G to 10 countries where the mobile operator is present. According to news reports, Vodafone now sells the phone in Australia, Italy, New Zealand and Portugal, and it is expected to bring it to Egypt, the Czech Republic, Greece, India, South Africa and Turkey later this year.

Up to now Apple has insisted on exclusive agreements with carriers, striking deals with AT&T in the US, O2 in Britain, Orange in France, and Deutsche Telekom in Germany. In exchange for exclusivity, Apple takes a cut of the revenue that wireless operators collect for voice and data services each month, something no other phone maker is believed to get.

iPhone 3G combines all the revolutionary features of iPhone with 3G networking that is twice as fast as the first generation iPhone, built-in GPS for expanded location based mobile services, and iPhone 2.0 software which includes support for Microsoft Exchange ActiveSync and runs the hundreds of third party applications already built with the recently released iPhone SDK.