Wired
According to a Nikkei News report, people familiar with the matter revealed that Apple plans to cut the production of AirPods wireless headsets by 25%-30% this year because increased competition has weakened sales of the company’s fastest-growing product line.
Currently, Apple’s output in 2021 is expected to be between 75 million and 85 million units, compared with the previous production forecast of 110 million units. The downward revision of the data shows that the market demand for AirPods is weakening. Since its launch in 2016, AirPods shipments have been increasing by a double-digit percentage.
A person familiar with the matter said: “The most obvious reduction in orders was at the end of the second quarter and the beginning of the third quarter. The inventory level of AirPods in the warehouse and store inventory are currently high, but the demand is not as strong as expected.”
The retail price of AirPods Pro on Tmall is 1498 yuan (approximately US$231), a 25% discount from the original price of 1999 yuan.
People familiar with the matter said that Apple hopes that the new AirPods launched this year can stimulate sales.
Data from the research company Counterpoint Research shows that Apple shipped about 72.8 million AirPods last year, leading the Bluetooth wireless headset market with a 31% share. In the last three months of 2020, wearable devices and other accessories, including AirPods, Apple Watch, and HomePod, have brought Apple $12.97 billion in revenue, accounting for more than 11% of Apple’s total revenue.
However, although AirPods market share is in a leading position, but sales are lower than Apple’s expectations. Several people familiar with the matter said that Apple asked suppliers to produce about 80 to 90 million AirPods last year. They added that unsold AirPods eventually became inventory.
As more and more users switch to cheaper wireless headsets, AirPods are one of the few devices that Apple did not have a significant increase in sales at the end of last year. In contrast, due to the new coronavirus pandemic boosting the home office related economy, the demand for MacBook and iPad series products has been strong.
Apple has played an important role in cultivating the true wireless headset market, that is, wireless headsets that do not use wires to connect two ear parts. With the introduction of the first-generation AirPods, smartphone competitors including Samsung, Huawei and Xiaomi have launched similar devices. Smaller, unbranded electronics manufacturers have also joined the competition and introduced cheaper alternatives.
Counterpoint’s data shows that increased competition has eroded Apple’s market share, from 60% in 2018 and 47% in 2019 to 31% last year.
A high-level source said: “It is impossible to increase shipments by 30%, 40%, and 50% in the long term. At some point, growth will slow down and return to normal. At present, the era of rapid growth of AirPods It may have passed.”
Currently, Apple has not responded to media requests for comment.
Liz Lee, an analyst at Counterpoint Research, revealed to the media that her organization predicts that global shipments of true wireless headsets this year will increase by 33% to 310 million units. She said that AirPod shipments will also grow, but Apple “will lose market share because competition in the global wireless headset market is intensifying.”
Counterpoint’s 2021 data forecast shows that the market growth rate will slow down significantly from last year’s 80%. In addition, according to the research company, most of the market expansion this year will come from low-end products until the launch of new high-end products in the second half of the year, such as the latest AirPods.
At the same time, Chinese competitor Xiaomi’s global market share has increased from 6% in 2019 to 12% in 2020, becoming the world’s second largest manufacturer of true wireless headsets.
AirPods is a rare product for Apple. In the past few years, Apple AirPods have enjoyed rapid growth despite the slowdown in iPhone demand.
AirPods is also one of Apple’s first products to shift production from China to Vietnam. Luxshare Precision and GoerTek, the two key Chinese equipment manufacturers, have used Samsung’s supply chain established in Vietnam to expand their production capacity extensively in northern Vietnam since 2019. Unlike all Apple’s previous products, AirPods Pro and AirPods Max were initially mass-produced in Vietnam, not in China.
The popularity of AirPods is a good thing for these two Chinese assemblers. Last year, Goertek’s revenue increased by more than 64%, and its net profit doubled. Luxshare Precision’s revenue during the same period increased by 48%, and its net profit increased by more than 50%.
However, as of Monday, Luxshare Precision’s stock price has fallen more than 41% from its recent high in early January, and has fallen more than 30% this year. The share price of GoerTek has fallen by about 15% from its January high.
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