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Apple to cut production of AirPods because people are buying cheaper wireless earphones

Apple is now expecting to manufacture AirPods between 75 million and 85 million units for 2021.

twitter-logoShubham Verma | April 29, 2021 | Updated 10:30 IST

Highlights

  • Apple has reportedly asked its manufacturing partners to reduce production of AirPods.
  • Instead of 110 million units last year, Apple AirPods is expecting only around 85 million units.
  • Apple's market share in the wireless earphones market has dipped dramatically over last three years.

Apple AirPods are among the top-selling products in the iPhone maker's kitty, but its sales may be losing steam. And that is why Apple has reportedly asked its manufacturing lines to reduce the production of AirPods wireless earphones by 25 to 30 per cent. Apple is facing huge competition in the wireless earphones market in the US and even though the iPhone maker is in the leading position, sales of the AirPods fell short of Apple's expectations. Apple got AirPods manufactured more than it is selling, leading to a huge unsold inventory right now.

According to Nikkei Asia, Apple is now expecting to manufacture AirPods between 75 million and 85 million units for 2021. It was previously hopeful about sales of more units, which is why its previous forecast suggested 110 million units. Apple's plan to downscale the production of AirPods indicates that the demand for the premium wireless earphones that has become an integral part of Apple's ecosystem is weakening, despite the double-digit growth in terms of percentages ever since AirPods were launched in 2016.

The report has said, citing people familiar with the development, that the reduction in orders for AirPods will target the second quarter leading to the beginning of the third quarter. "The levels of inventory [in warehouses] and in-store stocks of AirPods are currently high ... and demand is not as strong as expected," said the report. Apple reportedly asked its manufacturing partners to make around 80 million to 90 million AirPods units last year, a big stock of which is unsold and has become inventory. Now, Apple may be hoping the upcoming AirPods model, possibly the AirPods 3, will give momentum to the sales of its wireless earphones.

Because of the unsold inventory, Apple AirPods are retailing for far less in many markets. According to the report, AirPods Pro earphones (read the review here) are selling for CNY 1,498 on T-mall, which is a 25 per cent discount over the original price of CNY 1,999. In India, the AirPods Pro earphones are selling for as low as Rs 20,990, down from the original price of Rs 24,900.

Apple shipped nearly 72.8 million AirPods units last year, emerging as the leader in the market for wireless earphones globally, as per the data of Counterpoint Research. The total revenue of Apple from wearable and other accessories, which includes AirPods, in the last three months of 2020 was $12.97 billion, 11 per cent of the total for that quarter. The maximum sales of AirPods happened towards the holiday season in the US and other parts of the world, which is when people were looking to buy gifts and an affordable set of earphones. But, contrary to how AirPods were performing, sales of MacBook and iPad lines grew dramatically, thanks to the coronavirus pandemic that boosted the work-from-home culture.

Apple has stiff competition in the market. Not just in the US but in several other countries also, including India, where brands such as boAt, Realme, Noise, and Redmi have been selling truly wireless earphones for as low as Rs 2,000. The cheapest AirPods model here costs around Rs 10,000, on the other hand. According to Counterpoint Research, Apple's market share shrunk from 60 per cent in 2018 to 47 per cent in 2019 to just 31 per cent in 2020.

Apple is now pinning hopes on the next generation of AirPods to revive sales. The AirPods 3 were widely expected to arrive at the Spring Loaded event where Apple launched a new Purple variant of the iPhone 12, the M1 chip-powered iMac and iPad lines, and a new Apple TV 4K. However, that did not happen. So, right now, it is unclear when Apple will launch its next AirPods.

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