Jefferies Financial Group Inc. is pessimistic about the outlook of the smartphone market, but has raised its shipment expectations for Apple Inc. (AAPL.US): "strong performance during the '618' period is crucial."

Investment bank Jefferies Financial Group Inc. has lowered its forecast for smartphone sales from 2025 to 2027, as the firm believes that the outlook for smartphones has deteriorated for various reasons. Analysts at the firm stated in a client report: "The U.S. tariff policy has brought a high degree of uncertainty, but also accelerated demand in the second quarter of 2025. Given the lack of innovation, uncertain economic outlook, high Android inventory, and gradual reduction of Chinese subsidies, the second half of the year will face greater challenges." As a result, Jefferies Financial Group Inc. has lowered its overall smartphone shipment expectations for 2025 to 2027 by 2% to 4%. Despite the overall uncertain outlook for smartphones, Jefferies Financial Group Inc. has raised its shipment expectations for Apple Inc.'s iPhone by 4%. This is due to early shipments and the extension of discount activities in the Chinese market during the "618" period to six weeks (usually five weeks). Analysts stated: "Our industry survey shows that smartphone sales during this year's '618' period increased by about 4% year-on-year, lower than last year's approximately 6% increase." "More importantly, Apple Inc. launched smart and targeted discounts during the '618' period, driving a 19% year-on-year increase in iPhone sales, far exceeding last year's 7%. This also led to a sales growth of approximately 10% in the second quarter in China. Before '618,' our industry survey showed a 9% year-on-year decline in iPhone sales, but the strong performance during '618' brought its growth for the year to date back to parity." In contrast, the growth of Android devices during the "618" promotion in China was minimal, and Android device sales are likely to have declined by 4% year-on-year. Analysts explained: "Given the high inventory of Android devices before '618' (about 50 days), we believe that despite offering significant discounts, sales are still poor, indicating that inventory remains high and will face pressure on price cuts in the second half of the year." "Our industry survey also shows that the inventory level of Android devices in overseas markets is even higher than in China. Therefore, the weak outlook for Android devices is the main reason for lowering our global shipment expectations. We have also lowered expectations for 5G devices, solely due to the drag from Android."