Sales of Apple AirPods may drop 15% in 2021, says analyst

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Consumers are losing interest in

Apple

AirPods?

In a research note on Monday, TFI Asset Management analyst Ming-Chi Kuo predicts that Apple AirPods shipments (ticker: AAPL) will decline by 2021 – partly due to increased competition in the audio market wireless stereo. He says that while the market is still growing, the focus is shifting to cheaper alternatives.

Kuo cut his 2021 shipping forecast for AirPods by 30% to 35%, to 75 million to 80 million units, which he notes would drop by 10% to 15% from 2020. He writes that the consensus of Wall Street for this year is 110 million to 120 million units this year, which would be an increase of 25% to 30%.

Kuo writes that his research found that Apple AirPods shipments in the first three quarters of 2021 will fall by about 25% year on year. Even better-than-expected demand for AirPods 3, which he expects to go into mass production in the third quarter, will do nothing better than to keep sales in the fourth quarter steady year after year. He also reports that shipments from the AirPods Max line of headphones have been modest, projecting shipments this year of around 1 million units.

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Kuo says the TWS market – an acronym for True Wireless Stereo – grew about 45% year on year in the fourth quarter of 2020, but AirPods’ market share dropped to 30%, from about 40% a year earlier. He reports that sales of low-cost wireless audio products are growing rapidly – he says that more than half of TWS’s 10 best-selling products are priced below $ 50, against $ 159 for cheaper AirPods.

Kuo says that the initial success of AirPods was linked to easy, high-quality Bluetooth connectivity. He says that Apple maintains the advantage in both elements, but that competition is recovering and lowering prices. He notes, for example, that while AirPods Pro offers active noise cancellation and other enhanced features compared to other AirPods, the higher price (they cost $ 249) is silencing consumer interest.

“The competitive advantage of Apple products is in providing hardware, software and service ecosystem integration, not just hardware,” writes Kuo. “Siri is the core of the AirPods ‘software and service ecosystem, but since Siri’s competitive advantage is not significant, the gap between the AirPods’ vanguard and that of its competitors narrows due to the lack of ecosystem protection as competitors gradually improve the user experience and launch lower price strategies at the same time. We believe that mini HomePod and HomePod shipments were significantly lower than expected for the same reason. “

Apple’s shares on Monday rose 1.7% to $ 123.11.

Write to Eric J. Savitz at eric.savitz@barrons.com