"The analyst who understands Apple the most" Ming-Chi Kuo: If Apple does not change its strategy, iPhone revenue will see a mid-single-digit decline by 2026

On Sunday, "the analyst who understands Apple the most," Ming-Chi Kuo, stated that the revenue from iPhone has offset the decline in shipments due to the continuous improvement of the product mix, but the effectiveness of this strategy has entered a countdown, and the proportion of Pro models cannot be increased indefinitely.

Apple Intelligence has little help for iPhone sales

The United States is currently the most representative place in the world providing Apple Intelligence. In contrast, the Japanese market, which has not yet provided Apple Intelligence.

Assuming that the product mix ratio sold by Apple in different regions is similar, and ignoring exchange rates and price differences in various countries, the revenue proportion should be similar to the shipment proportion. Additionally, assuming that the U.S. accounts for about 75% of total sales/shipments in the Americas. Although these assumptions are not precise, they are sufficient to judge trends.

According to Apple's financial report on January 30 and the above assumptions:

1. The U.S. accounted for global iPhone shipments: 31.8% in Q4 2024, 31.7% in Q4 2023.
2. Japan accounted for global iPhone shipments in Q4 2024 and Q4 2023 at 7.2% and 6.5%, respectively.

According to my latest industry survey, the global shipments of the iPhone 16 series in Q4 2024 and the iPhone 15 series in Q4 2023 are approximately 66 million units and 68 million units, respectively.

Organizing the above information, we can obtain the following table.

From the table above, it can be seen that the shipments of the new iPhone in the U.S. in Q4 2024 have slightly decreased year-on-year. Interestingly, the Japanese market, which does not provide Apple Intelligence, achieved a high single-digit year-on-year growth in iPhone shipments in Q4 2024.

The potential error in this estimate comes from the above assumptions, but it can be reasonably inferred that even if the iPhone shipments in the U.S. market achieved year-on-year growth in Q4 2024, the extent should be limited. Furthermore, if we also consider the conclusion from third-party surveys that Apple Intelligence users have low interest, it aligns with my above conclusion.

iPhone's revenue has offset the decline in shipments due to continuous improvement in the product mix, but the effectiveness of this strategy has entered a countdown

According to my industry survey, the overall iPhone shipments in Q4 2024 decreased by about 5.8%, but iPhone revenue only decreased by 0.8% year-on-year in Q4 2024, due to further optimization of the product shipment mix in Q4 2024.

In terms of the new Pro series models accounting for total shipments, it significantly increased from 54% in Q4 2023 to 61%. Additionally, users purchasing the Pro series are very likely to choose to pay extra for higher storage versions, thus the Pro series contributes significantly to the average selling price Not every company can implement a strategy of offsetting declining shipment volumes by raising unit prices to maintain revenue; this requires strong brand power.

However, the proportion of Pro models cannot increase indefinitely. The decline in iPhone revenue starting in the first quarter of fiscal year 2025 is a warning signal. If Apple does not adjust its iPhone product and sales strategy, following this trend, we may see a mid-single-digit year-on-year decline in iPhone revenue by 2026.