Citi Analysts See iPhone 5 and iPad Demand Softening

Over the past few months, slow sales and poor demand for iPhone 5 and iPad have been investors’ nightmare and even if Apple remains the No. 1 smartphone maker in US, a new report shows there’s reason to worry about the future. Citi analysts see iPhone 5 and iPad demand softening.

A few weeks ago, reports about Apple cutting orders at suppliers in China went viral, as industry experts considered it a clear demand that iPhone isn’t selling like it used to. Citi analysts Glen Yeung, Jim Suva and Walter H. Pritchard informed investors they have reduced estimates for Apple’s second quarter revenue after finding evidence iPhone 5 and iPad demand is softening.

“In conducting our regular field work with the hardware supply chain, we again find evidence of reduced demand to Apple’s suppliers for iPhone 5 related components” reads analysts’ note to investors. “While production does not directly translate to sales (for example, we estimate Apple finished 1Q13 (Dec) with 10M iPhone units in inventory), we suspect this is an indication of softer demand for iPhone 5 and iPhone 4S” the note adds.

For this quarter, Citi analyst Glen Yeung estimates iPhone unit sales at about 34-35 million, although Wall Street’s estimates see 37 million units sold. However, for the second quarter, Yeung sees much more reduced sales, at 25 million, 7 million under Wall Street estimates. Yeung believes iPhone sales are being cannibalized by iPad Mini, although he expects production to flatten during the second quarter as Apple clears the stock for the new product release.

As for the low-cost iPhone so intensely rumored lately, Yeung does not believe that’s actually the case for Apple this upcoming quarter. “Despite much speculation amongst investors and third-party research, we find limited evidence of a low-end iPhone at this stage” Yeung told investors. “As noted above, we continue to expect iPhone 5S to be launched (albeit in early C3Q13 vs. late C2Q13) and anticipate a large-screen iPhone in late 2013/early 2014. But clear indications of a low-end iPhone remain elusive” the Citi analyst concluded.