Apple reportedly cuts production of HomePod amid poor sales (AAPL)

smart speaker sales in the us

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Apple reportedly slashed production of its HomePod smart speaker and lowered sales forecasts for the device in late March, amid its ongoing struggles to make significant gains on Amazon and Google in the AI-powered speaker market, according to Bloomberg.

Despite early indications the device might catch on — pre-orders of the device were strong, and during January, it captured one-third of all smart speaker sales in the US — the $350 speaker accounted for only 10% of all smart speaker sales in the US during the first 10 weeks it was available, according to Slice Intelligence data reviewed by Bloomberg. Slice estimates that Google and Amazon grabbed 14% and 73%, respectively, of all US sales over the same period. Likely in response to these lackluster numbers, Apple reportedly cut back some orders it placed with Inventec, one of the companies that manufacturers the device.

Apple might be scaling back production ahead of unveiling a new iteration of the device later this year. Business Insider reported last month that Apple was considering unveiling a new version of the HomePod at its annual World Wide Developer Conference in June that’d be priced between $150 and $200, a rumor echoed by a KGI Securities analyst note last week. This move would put the HomePod in competition with the flagship Amazon Echo and Google Home, which are priced at $100 and $129, respectively, for the first time. Apple could thus be scaling back production of the current device ahead of the start of production of this other, cheaper speaker.

Apple’s market position will likely improve in the coming months, even if it doesn’t introduce a cheaper device, but it’ll need to make improvements to Siri to counter Amazon’s dominance. Several of the tech titan’s other products weren’t immediate hits — the Apple Watch, notably, faced significant challenges right when it was released, but is now widely recognized as one of the top smartwatches on the market.

Apple has the time to make the necessary improvements to HomePod to sell millions of devices and help it catch up to the lead Amazon and Google have built in the smart speaker market, especially since it will have this coming holiday shopping season to offer discounts and try to grow its installed base. Nonetheless, reviews of Siri on the HomePod found the voice assistant was far less capable of answering basic information queries than Alexa and Google Assistant. Apple doesn’t have access to the troves of data Amazon and Google have to fine-tune their voice assistants, though the tech titan claims this isn’t an impediment to it making continuous improvements to Siri.

Until Apple is able to do so, however, it will be difficult for it to attract enough customers beyond its famous loyalists to take down Amazon’s dominant position in the US smart speaker market.

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