Kuo: AirPods 3 Mass Production to Start in Q3 2021

Mass production will begin on the third-generation AirPods in the third quarter of 2021, according to an investors note from analyst Ming-Chi Kuo that was seen by MacRumors.

If mass production is not set to begin until the third quarter of 2021, it would mean that the ‌AirPods‌ 3 wouldn’t ship until later in the year. Kuo previously said back in November that the ‌AirPods‌ 3 would launch in the first half of 2021, and other rumors have suggested the new ‌AirPods‌ could come as soon as this month.

Kuo expects ‌AirPods‌ shipments from the first quarter of 2021 to the third quarter of 2021 to decline by about 25 percent year over year to 55 million units. Should demand for the ‌AirPods‌ 3 be better than expected, fourth quarter ‌AirPods‌ shipments will remain flat year over year at 23 million units. Overall ‌AirPods‌ shipments across 2021 are expected to decline to 78 million units, down from 90 million in 2020.

It is unclear at this time if ‌AirPods‌ 2 will stop being produced when the ‌AirPods‌ 3 enter mass production. Kuo says that Apple has a dilemma — if ‌AirPods‌ 2 stick around and are sold at a lower price, it could affect ‌AirPods‌ 3 demand, but if there’s a no low-priced ‌AirPods‌ model could have a negative effect.

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.

Kuo attributes the decline in ‌AirPods‌ shipment due to increased competition and a loss of market share. There are a number of lower-priced true wireless earbud options on the market for Apple to contend with.

‌AirPods‌ have quick pairing and fast switching capabilities that give them an edge over competitors, but Kuo says that these advantages are “gradually offset” by improved user experiences and lower prices offered by competitors.

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.

Kuo says that if Apple wants to improve ‌AirPods‌ shipments in the future, hardware innovation like health management functionality is necessary.