The analyst who understands Apple best: Apple will face more severe challenges this year, the market is overly optimistic, and there is a risk of stock price decline

Is the market overly optimistic about Apple?

On Friday local time, Tianfeng International analyst Guo Mingqi stated that Apple faces severe challenges in 2025, with iPhone shipment growth nearly stagnating. Even the release of the new iPhone SE4 is unlikely to boost sales, as business in China continues to shrink, and AI services have yet to contribute.

Here is the complete report:

iPhone sales outlook is not optimistic, and business in China continues to shrink

Apple takes a conservative view on iPhone outlook, with supply chain surveys indicating 2025 shipments are about 8-10% lower than market consensus. Apple is cautious about its outlook when discussing 2025 iPhone production plans with key suppliers.

Even with the new iPhone SE4 (expected to be released around mid-1H25), iPhone shipments in the first half of 2025 are expected to decline by about 6% year-on-year (1Q25 is expected to be flat year-on-year due to early shipments in January to avoid tariffs after Trump took office, while 2Q25 is expected to decline).

In December 2024, smartphone shipments in the Chinese market are expected to be about the same as in the same period of 2023, but iPhone shipments are expected to decline by about 10-12% year-on-year, indicating that iPhone's market share in China continues to shrink.

The ultra-thin iPhone expected to be mass-produced in 2H25 (with a thickness of about 5.5mm) and the planned foldable iPhone may not support physical SIM cards due to the pursuit of a thin design, potentially only supporting eSIM. Since the Chinese market currently does not promote phones that only support eSIM, these two models may face challenges in shipment momentum if their designs do not change.

Although the shipment volume of the ultra-thin iPhone 17 is higher than that of the iPhone Plus, it is still insufficient to drive iPhone sales. The key issues include some components being downgraded while maintaining high prices, and the user experience remaining similar to the current iPhone.

iPhone shipments in 2024 are expected to be about 220 million units, with an estimated 2025 shipment of about 220-225 million units, lower than the market consensus of 240 million units (or higher).

AI services have yet to contribute

So far, there is no evidence that Apple Intelligence can contribute to hardware replacement trends or service revenue.

Tim Cook stated in an interview with Wired last month that there has never been any internal discussion about charging for the service, which indicates that previous expectations from some analysts and media that Apple Intelligence could charge in the foreseeable future and drive service business were overly optimistic.

Previous surveys showed that most iPhone users are not interested in Apple Intelligence, which aligns with supply chain surveys, indicating that since Apple introduced Apple Intelligence, there has been no help in driving iPhone replacement trends.

Apple faces several structural challenges in promoting edge AI. For example, although Apple Intelligence generated significant attention after its release at WWDC 2024, its attractiveness has significantly declined compared to rapidly evolving cloud AI months later I do not have a negative outlook on the long-term trend of Apple Intelligence, but based on the above, I have not yet found evidence that Apple Intelligence can contribute to hardware replacement waves and service revenue, so we must at least be cautious about the potential downside risks caused by the market's previous excessive optimism.