Tianfeng International analyst Ming-Chi Kuo on Monday lowered his forecast for AirPods shipments this year by 30-35 percent to 75 million units-80 million units, meaning he expects Apple's shipments of the product to fall by 10-15 percent year-on-year this year.
The market consensus is for AirPods to grow 25-30 percent year-on-year to 110-120 million units in 2021, Kuo said in a report on Monday, adding that his view differs from the market consensus.
AirPods shipments will decline 25 percent year-on-year to 55 million units in the first three quarters of the year and to about 78 million units for the full year, he predicted.
The product shift will result in a significant reduction in AirPods 2 shipments to 3 million units in the third quarter, Kuo said, adding that the combined share of AirPods 3 and AirPods 2 shipments will reach 70 percent for the year.
Kuo said AirPods shipments will decline because its hardware is not much different from competitors' lower-priced products and lacked a strong ecology.
More than 50 percent of the world's top 10 selling true wireless headphones (TWS) are priced below $50, Kuo said. At $149 for the cheapest model of AirPods, "we think the growth of lower-priced models is continuing to accelerate."
Although the AirPods Pro's low latency is about 50 percent and 20 percent better than AirPods 1 and 2 respectively and offers active noise cancellation, sales results showed that consumers are not too willing to spend more than $100 on the AirPods Pro's selling points, he said.
The AirPod's ease of use and high quality of Bluetooth connectivity is offset by the competition's strategy of gradually improving the experience and lowering the price, he said.
Kuo believes the core of AirPods' software and services ecosystem is Siri, but because Siri's competitive advantage is not significant, AirPods' lack of ecological protection narrows the gap in leadership as competitors gradually improve their user experience and launch lower-priced strategies at the same time.
HomePod and HomePod mini shipments were significantly lower than expected for the same reason, Kuo said.
If AirPods shipments are to grow again in the future, a strong ecosystem is needed, or hardware innovation to redefine TWS user behavior, such as providing health management features, he said.
If the market demand for AirPods 3 does not outperform market expectations, investors will gradually shift their focus from AirPods to non-AirPods, Kuo said.