- Apple is planning to launch some new features in its upcoming MacBook line-up.
- The initial channel checks imply a summer 2016 launch with Intel and AMD having already adjusted for a summer launch.
- I'm anticipating 18.2% y/y shipment growth for the Mac segment at 22.33 million shipments.
This year’s Apple Inc. (NSDQ:AAPL) MacBook Pro line-up is expected to be a lot better than the prior, and in my opinion, the refresh of the 13-inch and 15-inch variant is long overdue given the grimacing results from the PC segment and needed innovation at the high-end of the market. Based on reports, from reliable sources and more notably Ming-Chi Kuo, Apple is planning to launch a thinner version of the MacBook Pro 13-inch and 15-inch model, which is driven by a new metal injection mold hinge making the device thinner at perhaps the thickest part of the laptop. Furthermore, the MacBook Pro 13-inch and 15-inch is expected to come with an OLED touch bar, which is basically a long touch screen strip giving access to customizable shortcut key commands making it somewhat reminiscent of an iPad while keeping true to the design philosophy of conventional PCs. Of course launching this new feature will require Apple to update Mac OS beyond OS X El Capitan, which is probably why the launch of this year’s model was delayed until WWDC 2016, making it the biggest product announcement before we exit the summer months.
That being the case, it’s not yet clear whether Apple will release a 4K or 5K variant of the MacBook Pro. Apple tends to be a step ahead of its competitors when it comes to screen resolution and with many video editors wanting to edit 4K footage on a mobile device, I weigh it increasingly probable that the $2,000+ device will come with a 4K or 5K display. This is mostly supported by the fact that AMD is expected to release its Polaris architecture with the MacBook Pro making the device nearly 4K proof for video editing purposes. Final Cut Pro X utilizes AMD’s graphics architecture; Apple has never really transitioned away from the AMD camp. Going forward, the most viable use case for AMD’s upcoming Polaris architecture would be for 4K content editing, hence the need for a 4K retina display.
Furthermore, it’s not clear if AMD has moved into volume production of the Polaris-series, but AMD could have moved the time table further-up for the mobile variants of the graphics line-up as the company spoke extensively of major design wins on numerous earnings conference calls over the past several quarters, which implies that AMD has been working on the summer 2016 roll out of the MacBook Pro for quite a while now. With volumes likely to exceed 2.5 million or more with an ASP above $200 for the 470M, AMD is perhaps prioritizing the notebook launch. The chip will likely meet this year’s Nvidia 980M performance allowing Apple to reassert its dominance at the high-end of the UltraBook segment.
We also know that Apple gets a special variant of the Intel CPU Q-series at a 35W TDP. Ironically, an i5 with a 35W TDP is more powerful than even an i7 U-series at 15W TDP, with Core i7 at 35W TDP likely to exceed the performance of Skylake i7-6700Q at 25W when based on the voltage and power draw. This isn’t the case when comparing it to prior generation Haswell models, but with Apple initiating a transition to the Skylake architecture we’re likely to see the MacBook Pro come with 35W and 45W variants of the Skylake series, which will give it a performance edge in terms of sheer processing power. Most of this is appealing to power users working on high-end video editing, and rendering from a mobile workstation, which implies Apple will retain its edge at the $2,000 to $2,500 price point.
Also read: What To Expect Ahead Of The iPhone 7 Launch?
I'm also fairly certain of a summer release for the MacBook Pro 2016, as channel checks from Credit Suisse implies inventory build-up among the semiconductors.
From what I can gather, the inventory days has increased to near or new all-time highs. Furthermore, OEMs have reduced inventory rather consistently across the board. With Apple maintaining inventory turnover at roughly 12.95 days, we know that the semiconductors have already gone through a significant chunk of volume production at the fab and are probably exiting the assembly, test, mark and packing stage, which implies that once Apple is able to reach volume production in its facilities and formalizes the launch date with some pre-release marketing, the MPUs (processors) will soon flood Apple’s facilities. The difference with OEMs is that they operate on much tighter inventory cycles in general, which is why the semiconductor inventory build is always indicative of major product release cadences.
We can also reassert the prior point based on the back-end fab inventory figure dropping. So we know that a good chunk of the production for initial shipments have gone through the fab as wafer volumes are dropping. The above seasonal trends will also factor in the impact from summer month as students typically buy notebooks over the summer months. If anything, this implies that Apple alone is distorting the supply chain figures, which implies that the Mac segment will post meaningful y/y improvements upon the release of the MacBook Pro in Q3’16 and Q4’16.
Apple currently holds around 7.4% market share of global PC shipments, but when looking at other studies from the past, Apple had 90% market share above the $1,000 price point. Since these studies aren’t necessarily reliable, I rely on a prior price elasticity study I had attempted on global PC shipments.
After readjusting for a 5.58% shipment decline for global PC shipments based on the current trajectory, and running a price elasticity study, I anticipate that 22.21 million PCs will be sold at $1,250. Apple’s ASP of $1,256 closely corresponds to price sensitivity analysis. I anticipate that 5.41 million PCs priced above $1,250 were sold in Q1’16 and of that amount according to IDC’s most recent figure, Apple sold 4.466 million PCs in Q1’16, which implies that Apple had 82.5% of the market at its average price point of $1,256. Since more than 4/5th of the premium PC market is concentrated in Apple’s product line, the OEMs, i.e. AMD and Intel likely prioritized production of components ahead of the MacBook Pro refresh. There’s only so many high-end OEMs to service, so Apple takes priority as these high-end chips variants carry the highest gross margins. Furthermore, I’m anticipating Apple to gain share, and perhaps drive organic shipment growth in the market once we reach 2H’16, which is why I forecast a more modest full-year decline than Q1’16 trends of roughly -9.6%.
I’m anticipating that by the end of CY’16 Apple will sell 22.33 million Mac units, translating to 8.4% global PC shipment share, which corresponds to a 1 percentage point improvement in market share, and 100% market share for PCs priced above $1,250. Since above 100% isn’t exactly feasible, the release of the MacBook refresh implies lower price sensitivity for aggregated global PC volumes, implying that ASP for PCs, in general, will increase. I’m also anticipating the remaining OEMs to get squeezed out of the category even more so than in prior years.
The company sold 18.9 million units in the prior fiscal-year, which implies roughly 18.14% y/y growth at 22.33 million units. I believe the market for premium PCs will expand, which implies a difference in consumer price sensitivity than historical figures. It’s not exactly clear to what extent the segment could perform above reasonable share gain assumptions as there are limitations on discretionary spending. Furthermore, my estimate gets cut-off by the ending of Apple’s fiscal year in September, so FY’16 and FY’17 impact from 2016 MacBook Pro gets split with it more concentrated in FY Q1’17 or CY Q4’16.
I continue to reiterate my buy recommendation on Apple stock and $107.72 price target.