Why You Still Can't Buy a Jet Black iPhone 7

Jet Black and every Plus model are nearly impossible to find, and authorized resellers have pushed the price to 20,000 yuan

At 8 a.m. on September 16, the second day of the Mid-Autumn Festival holiday had just begun. Most of the malls along Shanghai's Nanjing East Road pedestrian street were still getting ready to open, but at the Henderson Metropolitan on the east side, two lines of several hundred people each had already formed.

One ran from the ground floor up a motionless escalator to the second floor, where a door leads into the Apple Nanjing East Road store. Everyone in it had reserved an iPhone online and come to pick it up.

The other line stood at the store's street entrance. These people had shown up without a reservation, and had to wait until the store opened at 10 a.m. sharp before they could go in and buy anything. A good share of them wanted the new iPhone in Jet Black. That day, only the first few dozen took one home.

Jet Black and every Plus model are nearly impossible to find

Since sales opened on September 16, Apple has hung big black billboards all over the country. Getting hold of the black, mirror-finish iPhone 7 Plus in those ads, though, is close to impossible — unless you ordered in the first two minutes after pre-orders opened at 3 p.m. on September 9, or you queued for hours like the people above.

Over the next two days, even Apple's own retail stores, the best-stocked channel there is, had very little on hand. On September 18, QDaily reporters visited four Apple stores in Beijing and Shanghai. Plenty of customers were asking about Jet Black, and the answer was much the same everywhere: "Whichever black you want, if you want it in stock you have to grab it on the website at 8 a.m."

Staff at several stores said that after the few thousand iPhone 7 and 7 Plus units set aside for the September 16 launch sold out, only a few hundred units had arrived each day since. Depending on where the store was, the Jet Black units in those shipments ranged from a handful to none at all.

Told by a reporter that the Nanjing East Road store was getting a few Jet Black units a day, a staffer at the Shanghai Wujiaochang store sighed: "Location really is everything." His store, with less foot traffic, had not received a single Jet Black unit since the 16th.

Order from the website today and the Jet Black iPhone 7 takes three to five weeks to ship. The Jet Black iPhone 7 Plus won't arrive until November. Even the other colors take two to three weeks.

Short on stock, Apple's authorized resellers can push the price to 20,000 yuan

If the official channel is hard, everywhere else is harder. The Apple flagship store on Tmall has already pulled the iPhone 7 Plus from its listings. On the morning of the 18th, the iPhone 7 was in stock in only four colors — black (matte), gold, pink and silver — and none in 32GB. By noon, black was gone too.

JD.com had only gold and rose gold iPhone 7 units left, and every 7 Plus was sold out.

One Apple authorized reseller near Dongzhimen in Beijing did have stock — just not at list price. The Jet Black iPhone 7 Plus 256GB, which lists for 7,988 yuan, was 20,000 yuan a unit. The Jet Black iPhone 7 256GB, listed at 6,988 yuan, had been marked up to 13,888.

Even the non-black iPhone 7 models were quoted between 6,188 and 11,888 yuan, 800 to 5,000 yuan above list.

"That's the price everywhere right now. There's just too little supply," a staffer at the shop told our reporter. After the company sold through its September 16 batch, he said, it got nothing new from Apple and had to find units on its own; 40 of them had arrived on the 18th.

Using the contact details on Apple's website, we called about 40 authorized resellers in Beijing, Changchun, Tianjin, Nanjing, Shanghai and elsewhere. All but a few that had sold out entirely were selling the new iPhones above list, by anywhere from a few hundred to more than ten thousand yuan.

Several staffers willing to discuss supply also confirmed that Apple had sent them nothing since the first batch.

The iPhone 7 has brought back the days when the iPhone 4 first reached China, or when the "bling gold" iPhone 5s went on sale. Apple's own stores hold the line on price but have nothing to sell; almost everywhere else charges a premium.

Apple clearly underestimated how badly people wanted the iPhone 7

In the week from the start of pre-orders on the 9th to Friday's close, Apple's stock rose 11.43% and the company's market value jumped by more than 60 billion US dollars. iPhone 7 sales, in other words, are running far ahead of Wall Street's expectations.

And not just Wall Street's. Apple misread early demand too.

The purchase limit shows it: Apple is nudging you to buy more. This time each person may buy four iPhone 7s (two of each model). Last year the limit was two.

Before the iPhone 7, sales of the iPhone — which brings in the great bulk of Apple's revenue — had fallen 16.3% and 15% in this year's first two quarters, and Tim Cook expected the slide to continue. In its July earnings report, Apple forecast revenue of 45.5 to 47.5 billion US dollars for July through September, about 10% below the quarter last year when the iPhone 6s launched.

Working from that forecast, Apple prepared fewer iPhone 7s. The companies that make its parts all told investors to expect smaller third-quarter orders.

The Japanese firm Alps supplies the iPhone's camera stabilization components. It expects its electronic-components revenue in this year's third quarter — the iPhone 7's first three months on sale — to come in 6.7% below the same period last year.

That is one of the more optimistic forecasts, since the 4.7-inch iPhone 7 now uses its parts as well; last year only the 5.5-inch model had optical image stabilization.

Taiwan's ASE, which handles Apple's chip packaging, testing and system-in-package work, expects that business to drop 13% year on year in the third quarter. JDI, one of the iPhone's main display suppliers, forecasts a 20% decline.

How many phones Apple builds depends on how much enthusiasm it expects.

Apple's distribution model is a fairly traditional one. Apart from its website and its several hundred retail stores worldwide, it sells first to other channels — e-commerce sites, carriers, authorized resellers — which then sell to consumers.

Overestimate demand and stock piles up in those channels at a loss. In April this year, Cook acknowledged on an earnings call that Apple had overestimated the iPhone 6s's popularity in its first two quarters and ended up spending more than 2 billion US dollars clearing phones stuck in the sales channel.

This time Apple misjudged demand again — in the other direction.

The color split went wrong too

Jet Black became the hardest iPhone to get partly because it is hard to make, and partly because of how Apple divided its stock among colors.

Rose gold, by contrast, is plentiful. Apple stores sold out of everything else still had rose gold and gold on hand.

We ordered an iPhone 7 in rose gold after the launch, and its ship date was recently moved up, from mid-to-late October to late September. Nothing of the sort is happening with either black.

If you bought an iPhone 5s three years ago, you will remember the shortage of the gold version. It looked almost exactly like this.

Apple badly underestimated how much Asian buyers liked gold, and it sold out within a day. For a stretch of that first month, the only color in stock in China was black.

In Apple's Hong Kong and Singapore online stores, the gold iPhone 5s also shipped more slowly; the first pre-orders were pushed into October.

Plain black is a classic iPhone color in its own right: the 3G, 3GS, 4, 4s and 5 all came in black. Apple only switched to space gray after the iPhone 5's coating started chipping. Now the classic black is back.

Jet Black is what most obviously sets the iPhone 7 apart from the two generations before it.

Apple is pushing that itself. In nearly every image it puts out — ads, the website — the words "iPhone 7" sit next to a Jet Black iPhone 7 Plus.

Figures from Slice show that in the first 48 hours of pre-orders, 46% of American buyers picked the matte black, and another 23% picked Jet Black. Fewer than a third chose anything that wasn't black.

It looks much like the iPhone 6, but it is harder to build

More people bought black, yet it is Jet Black specifically that has run dry — and that probably comes down to how it is made.

One Apple store told QDaily that of the phones arriving each day, perhaps 1 in 1,000 is Jet Black.

The color you can't buy is also the one that costs more to produce. Jony Ive explained the process briefly in a video: Apple puts an aluminum back shell through a "3D rotational polish," washing the metal over and over with a special compound, then anodizes it, then polishes that surface layer again. In short, more steps. Wired, citing people in the industry, reports that this can take at least 40 minutes longer than finishing an iPhone in another color.

The dual camera is harder to build as well.

The camera is the iPhone's biggest technical leap this year. The iPhone 7 Plus carries two of them for the first time, and with the new water resistance on top of that, it is a harder phone to assemble.

Nikkei reported that several suppliers were still fighting yield problems as late as August, and that if Apple insisted on a September launch it might not have enough phones at the start. That is precisely what happened.

Harder to make on one side; on the other, more people want the dual-camera iPhone 7 Plus.

Slice's figures show that in the first 48 hours of pre-orders, more people bought the iPhone 7 Plus than the iPhone 7 — the reverse of the previous two years.

Samsung, finally, did a great deal to make the iPhone 7 Plus shortage worse.

Apple had a new rival this year in Samsung's curved-screen phones. The Galaxy S7 Edge briefly passed the iPhone 6s as the best-selling smartphone in the United States.

Shortly before the iPhone 7 launch, Samsung released the Note 7, also with a curved screen, and sold more than 2 million within days.

Then the Note 7 started catching fire. Samsung announced a global recall in early September, and more Note 7s burned while the recall was under way. US airlines began telling passengers not to switch them on.

Samsung was the only Android maker able to sell phones in volume at the iPhone's price.

A report from the research firm MarketStragist found that 33% of Samsung owners were interested in the iPhone 7. There is no telling how many people who had planned to buy a Note 7 bought an iPhone 7 Plus instead once the fires started.

Pre-orders this hot — does that mean the iPhone 7 has reversed the slide that began with the iPhone 6s?

Nobody can answer that yet.

Products that are impossible to get at first and oversupplied later are nothing new. The Apple Watch sold out in 2015 too, with supply badly short. It didn't last: by its fifth quarter on sale, Apple Watch sales had fallen sharply from a year earlier.

The same is true of the iPhone Apple depends on. The gold iPhone 5s was severely short early on, yet iPhone sales that year came in only slightly above the iPhone 5's.

Predicting demand is not easy, which is why Apple generally asks its Asian suppliers to hold at least two weeks of inventory, so it can adjust assembly as the market responds.

Apple has started adjusting already. The Taiwanese outlet Digitimes reported that Apple added 10% to its chipmaker orders just before the iPhone 7 launch, and raised them again after.

Bloomberg, citing supply-chain sources, says Apple has made such post-launch adjustments in past years as well, and that order volumes usually settle only around mid-October, a month after a new iPhone goes on sale.

Only then will anyone be able to say how well the iPhone 7 is really selling.

For now, the shortage at least lets Tim Cook, fresh off two quarters of falling numbers, breathe out. Running short is much better than not selling.

Cover image from Visual China