Any time Apple (AAPL) releases a new iPhone, there are lineups. Hundreds of people waiting outside Apple Stores or wireless carriers hoping to be the first to snag one is good PR and great for business. Having an actual shortage leaving would-be customers to grumble and wait for weeks — or give up and buy a Samsung (SSNLF) Galaxy S5 instead — is not good for business.
Apple has a lot riding on the upcoming iPhone 6 release and the company clearly thinks there’s huge pent-up demand for a bigger iPhone. According to the Wall Street Journal’s Lorraine Luk, Apple has placed orders with its suppliers for the largest initial run ever for the iPhone 6 models, totaling 70 million and 80 million units.
AAPL investors will be watching nervously and hoping that Apple hasn’t overestimated iPhone 6 demand, because having new iPhones sitting unsold on shelves soon after launch could be a disaster for AAPL stock.
In fact, the iPhone 6 release is shaping up to be one of the most important product releases in Apple history.
Since the initial iPhone established Apple’s presence in the smartphone market, the company has been a leader in the smartphone world. The iPhone is consistently the best-selling smartphone model every year, and iPhone sales are a huge part of AAPL’s meteoric growth.
However, starting last year, there was a feeling that Apple was losing touch with consumer demand. The flagship iPhone 5s stubbornly remained a 4-inch device, dwarfed by virtually every competitor as phablets — smartphones with displays 5-inches or bigger — became the norm. Even BlackBerry (BBRY), a company that had become synonymous with being out of touch with consumers, released a 5-inch smartphone (the Z30).
This year, everyone is looking to Apple to finally join the phablet game, and all indicators are pointing to the fact that the iPhone 6 will actually be two devices: a big one and bigger one.
It may well be that there is considerable pent up demand for an iPhone 6 with a big screen and that the usual round of yearly upgraders and new iPhone buyers will be joined by throngs of people who have been holding onto older iPhones until Apple finally matched competitors like HTC, Samsung and Sony (SNE).
Count me among that group. I’m still using an iPhone 4s after passing on first the iPhone 5 then the iPhone 5s. But if the iPhone 6 is finally a big screen device, I’ll be upgrading as soon as possible.
By ordering in the 70 million-80 million unit range for the iPhone 6 release, Apple obviously doesn’t want to take chances on running out. Previous iPhone launches have seen constrained supplies. Pre-orders for the iPhone 5 sold out in under an hour in 2012. The initial run ordered for last year’s iPhone 5s and iPhone 5c was between 50 million and 60 million.
To put in that perspective, an initial iPhone 6 order for between 70 million and 80 million units doesn’t seem like that big of a gamble. After all, when you can move over 43 million iPhones in a non-launch quarter even as you’re under fire for selling the smallest flagship smartphone in a market that demands big, it’s not a stretch to think you’ll easily sell those big iPhone 6 models in massive numbers.
However, there is some risk…