Apple will start mass production for AirPods 3 in Q3 2021, so any expectations for the wireless headphones to launch in March 2021 are now in doubt. This new bit of news has come from an investor note by Ming-Chi Kuo, in which he speaks about AirPods 3, AirPods Pro, and AirPods Max shipments.
AirPods 3 might launch later than expected as per Kuo
Apple is rumored to be holding an event on March 23, during which it is expected that AirPods 3 will be announced. These next-generation versions of Apple’s popular wireless headphones are expected to feature a design similar to that of AirPods Pro, however, to keep costs low, they will not feature active noise cancellation and ear tips. The case will be smaller and wider too, similar to the Pro version.
A few days ago, Kang, a leaker with an impeccable track record so far with Apple leaks, had shared on Chinese social media that AirPods 3 are ready to ship, but the new information that we are getting from Kuo’s note contradicts this.
Kuo says that there is a possibility that Apple might continue to sell AirPods 2 after AirPods 3 launch. He also mentioned that AirPods Max accounts for just 1% of AirPods sales, which is too little to have any impact on their market share.
If AirPods 2 will go to end-of-life after AirPods 3’s mass production, we estimate AirPods 3, AirPods Pro, AirPods 2, and AirPods Max will account for about 40%, 28%, 31%, and 1% of total shipments, respectively, in 2021. If AirPods 2 will continue production after mass production of AirPods 3, we estimate AirPods 3, AirPods Pro, AirPods 2, and AirPods Max will account for about 32%, 28%, 39%, and 1% of total shipments in 2021, respectively.
As per Kuo, Apple’s AirPods advantage with ecosystem integration comes at a price, and it now faces massive competition from other companies. He notes that a segment where Apple could be competitive is Siri integration with AirPods, but it does not provide a lot of benefits over the competition, and the same issue impacts HomePod and HomePod mini. This might be the reason why Apple is expected to reduce the cost for AirPods 3.
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. We believe that HomePod and HomePod mini shipments were significantly lower than expected for the same reason.
He also discussed that AirPods Pro have better features but sales data shows that users are still opting to buy the cheaper regular AirPods, as they sell for $100 cheaper.
In terms of high quality, while AirPods Pro’s low latency is about 50% improvement vs. AirPods 1 and 20% improvement vs. AirPods 2, and it offers active noise cancellation, sales results show that consumers are not very willing to spend more than US$100 to buy the selling points of AirPods Pro.
We would suggest taking Kuo’s note with a grain of salt, despite his track record. Given his last note regarding far-off products launches like AR contacts in the next decade, it would not be wrong to think twice. There is still a possibility that AirPods 3 might launch soon, as suggested by other leaks.