TAIPEI – Apple is trimming the planned production of AirPods wireless earphones by 25% to 30% this year, as intensifying competition dents sales of the US technology giant’s fastest growing product line, sources in the Nikkei Asia case said.
Apple now expects to earn between 75 and 85 million units in 2021, compared to an earlier production forecast of 110 million units.
The downward revision indicates that demand for AirPods is weakening, whose shipments have grown by double ̵
“The most important order reduction is for the second quarter towards the beginning of the third quarter,” said one of those familiar with the matter. “The levels of inventory [in warehouses] and the stock of AirPods in the store is currently high … and demand is not as strong as expected. “
The retail price of the AirPods Pro at T-Mall, one of the leading Chinese e-commerce platforms, is 1,498 yuan ($ 231), a 25% discount compared to the original price tag of 1,999 yuan.
The American technology giant hopes that new AirPods to be launched this year will stimulate sales, the people said.
Apple shipped around 72.8 million units of AirPods last year, and dominated the market for wireless Bluetooth headphones with a share of 31%, the research company Counterpoint Research shows. Wearables and other accessories, which include AirPods, Apple Watch and HomePod, accounted for $ 12.97 billion in revenue, or over 11% of Apple’s total, in the last three months of 2020.
But despite its leading position, sales fell below Apple’s expectations – the company had asked suppliers to build around 80 million to 90 million AirPods last year, said several sources with direct knowledge of the matter. The unsold AirPods became inventory, they added.
AirPods is one of the few Apple devices that did not receive a significant increase in sales towards the end of last year, as more users turned to cheaper wireless earphones. MacBook and iPad layouts, on the other hand, have been in high demand thanks to the coronavirus pandemic that is boosting the home economy.
Apple has played an important role in cultivating the market for real wireless earphones, which have no cord connecting the two in-ear parts. Following the introduction of the first generation of AirPods, smartphone rivals including Samsung, Huawei and Xiaomi launched all similar devices. Smaller, branded electronics manufacturers have also joined the battle with cheaper alternatives.
This increase in competition has eroded Apple’s market share, from 60% in 2018 and 47% in 2019 to 31% last year, according to data from Counterpoint.
“It is not possible to grow 30%, 40%, 50% with shipments every year for a long time … At some point, growth will slow down and normalize,” said a source at the management level. “The time of high growth for AirPods may be over.”
Apple did not respond to Nikkei’s request for comment as of the release.
Liz Lee, an analyst at Counterpoint Research, told Nikkei Asia that her agency expects global shipments of real wireless headphones to grow by 33% this year, to 310 million units. AirPod shipments will also grow, she said, but Apple “will lose market share as competition intensifies in the global true wireless headphone market.”
Counterpoint’s prospects for 2021 represent a significant decline from last year’s market growth of 80%. Most of the expansion this year also comes from low-end and mid-tier products until the introduction of new high-end offerings, such as the latest AirPods, in the second half of the year, according to the research company.
Meanwhile, Chinese rival Xiaomi’s global market share doubled from 6% in 2019 to 12% in 2020, making it the world’s second largest manufacturer of true wireless headphones.
AirPods have been a rarity for Apple, and have grown rapidly in recent years as demand for iPhones declined.
AirPods are also one of the earliest products that Apple aggressively diversified production from China to Vietnam. Luxshare and GoerTek – the two most important Chinese manufacturers of the devices – have expanded their production capacity in North Vietnam since 2019, and utilized the supply chains built up in the country by Samsung. Unlike all previous Apple products, the AirPods Pro and AirPods Max were first mass-produced in Vietnam, not China.
The AirPods boom has been a boon for the two Chinese installers. GoerTek’s revenue jumped more than 64% and net revenue doubled last year, while Luxshare’s revenue increased by 48% and net profit increased by more than 50% in the same period.
However, Luxshares shares have fallen more than 41% from Monday from the last high in early January, and are more than 30% lower for the year. GoerTek’s shares are around 15% lower than the last high in January.