We measured global iPhone X lead times today (the 3rd time in 3 days) and found no changes since Friday morning, quoting 5-6 week delivery times. Based on previous years, we expect little change in lead times over the next few weeks. We view these 5-6 lead times as a directional positive for iPhone X demand (see paragraph below for our lead time framework). We continue believe the iPhone X will reach global supply-demand equilibrium sometime in the March quarter, or 3-4 months after launch. Typically it takes 2-3 months for a new iPhone to reach global supply-demand equilibrium.
Comparing and Interpreting the Lead Times. While far from an exact science, we want to give a framework about how we are thinking about lead times. With current lead times at 5-6 weeks, we view this as a sign that demand for the iPhone X is trending more favorable than investor expectations. Previously we had published that if lead times were below two weeks by Sunday, Oct 29, we would have viewed that as negative for initial iPhone X demand.
What Happens to the Model if iPhone X Demand is Consistent with iPhone 8 Demand? Investors are generally expecting iPhone X to account for 15-20% of iPhone units over the next cycle (FY18). We believe iPhone X will account for closer to 22% of units, which will be inline with iPhone 8 (including iPhone 8 Plus) demand. The Street is currently modeling for 17% revenue growth in FY18. If 22% of iPhone’s are the iPhone X, we believe total revenue growth for FY18 will 20%.
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