Ming-Chi Kuo, the most reliable Apple analyst out there, is pouring cold water on the recent rumor calling for the arrival of the third-generation AirPods via a supposed event later in March.
- Mass production starting in Q3.
- AirPods 3 should go on sale this fall.
- Meaning, they won’t launch this month.
AirPods competition is heating up
In his note to clients, seen by AppleInsider, MacRumors and 9to5Mac, the revered Apple analyst writes that mass production of the tentatively named “AirPods 3” will begin in the third quarter of this year. He is unsure whether Apple may keep the second-generation model at a reduced price or discontinue the AirPods 2 after the new model comes out.
We think it is still difficult to determine whether AirPods 2 will end production after AirPods 3 goes into mass production. Apple’s dilemma is that if AirPods 2 is sold at a lower price, it may affect AirPods 3 demand, but if there is no lower-priced AirPods model, it will not be conducive to AirPods shipment.
The analyst predicts that the AirPods Max will ship less than one million units annualy, offering “limited help” to overall AirPods sales. This isn’t surprising given their high asking price ($549) and niche status as premium over-ear headphones that deliver great sound.
Kuo is projecting for a circa 25 percent decline in AirPods shipment between the first and third quarter unless AirPods 3 demand exceeds Apple’s expectations. Should that happen, Kuo said, AirPods shipments in the holiday quarter should remain flat at 23 million annual units.
The competitive advantage of Apple’s products lies in providing integration of the hardware, software and service ecosystem, not just hardware. The iPhone, for example, has seen its market share decline due to the rapid growth of the smartphone market, but it has been able to maintain shipment growth because of the strong ecosystem of the App Store and developers.
We believe that Siri is the core of AirPods’ software and service ecosystem, but since Siri’s competitive advantage is not significant, the gap between AirPods’ leading edge and its competitors’ shrinks due to a lack of protection from the ecosystem as competitors gradually improve their user experience and launch lower-price strategies at the same time.
Kuo also believes that HomePod and HomePod mini shipments were “significantly lower than expected” for the same reason. Apple last week announced that it’s discounting the $299 full-size HomePod to focus on the $99 HomePod mini instead.
The AirPods Pro may be particularly affected by their high price.
In terms of high quality, while AirPods Pro’s low latency is about 50 percent improvement vs. AirPods 1 and 20 percent improvement vs. AirPods 2, and it offers active noise cancellation, sales results show that consumers are not very willing to spend more than $100 to buy the selling points of AirPods Pro.
Kuo’s note goes on to explain that overall AirPods shipments are projected to drop from 90 million units throughout 2020 to 78 million units in 2021 due to increased competition and many cheaper options available to customers out there.
CAD renders of the AirPods 3 and their charging case support Kuo’s theory that these earbuds will offer a blend of the current AirPods and the pricier, noise-canceling AirPods Pro.
Users should expect a shorter stem and a more comfortable design with replaceable silicone ear tips. The earbuds aren’t expected to have active noise-cancellation like the AirPods Pro. Meanwhile, the next AirPods Pro could lose their stem completely.