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- Demand for Apple's iPhone 7 increased as Samsung's phones faced a production fault causing some Samsung phones to explode.

- Due to the availability of substitutes in the market, e.g. the different types of smartphone brands like Apple, Samsung, Xiaomi. When there is an issue with a particular brand of phones, buyers who normally get that brand would automatically switch and source for another smart phone company.

- Hence from this case it can be seen that the availability of substitutes in the market has caused sales of Apple's iPhone 7 to rise while at the same time cause Samsung's Note 7 to fall.

- Resource price is a determinant of supply. When Apple makes a price cut on their suppliers, the cost of manufacturing iPhones decreases. Apple would now be able to manufacture more iPhones at a lower price and hence, supply of iPhones in the market would increase.

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Apple's iPhone supply chain manufacturers say sales of iPhone 7 will be ahead of iPhone 6s but are otherwise largely flat, say analysts Shawn Harrison and Gausia Chowdhury at Longbow Research.

Apple will grow iPhone sales by about 2.5%, Longbow believes, but there are caveats to that.

For obvious reasons, Longbow did not reveal who its sources were. They are likely employees or people with internal knowledge of Apple's OEMs, or "original equipment manufacturers." Those are the companies who actually assemble iPhones, often in Asia, like Cirrus Logic (semiconductors) and MFLEX (circuit boards). Longbow published this list of companies that derive their revenues from Apple manufacturing contracts:

Longbow Research

"All contacts see iPhone 7 volumes as slightly ahead of the iPhone 6s," said Harrison and Chowdhury in a recent note to investors.

"Contacts saw order upside during late CY3Q and during early CY4Q, particularly for the iPhone 7 Plus model, and are typically running at full capacity utilization. Contacts forecast at the midpoint 2.5% growth in orders vs. 2.0% previously."

The pair published this list of quotes from their secret sources:

"iPhone 7 production will peak in October and November. It is benefiting from Samsung's incident."

"We are producing with our full capacity for Apple now and we did receive some extra iPhone 7 orders since October. Now our 4Q iPhone volume is almost 15% higher than expectations, and I think the order increase is mainly for iPhone 7 Plus."

"2H iPhone 7 volumes can reach over 78M, while total 2H iPhone volumes are up over 30% compared to 1H, but flat compared to last year."

"iPhone 7 Plus orders are above expectations and inventory levels are low. So, many Apple suppliers are busy expanding production lines."

"iPhone orders are about flat compared to last year."

"Total iPhone volume in 4Q is about 75M, but still below expectations and flat or even down compared to last year. I think iPhone 7 production peak season is almost over, and Apple may start to cut orders in late December."

"I heard Macbook order volume is quite large in 4Q, but still down compared to last year."

"Apple may start another round of pricing cuts in December on several Apple suppliers such as flexible PCB and panel suppliers, but the pricing cuts will not affect other competitive suppliers such as DRAM and NAND and chip suppliers such as TSMC."

"It is too early to say how Trump's policy changes will affect Apple's supply chain, but I think it is unrealistic to move the whole supply chain to the U.S."

The "wild card" in all of this is China.

iPhone sales to the Chinese now form about 30% of all Apple's smartphone revenues, according to UBS analyst Stephen Milunovich, and sales there tanked 30% in the last quarter. So in order for iPhone sales to grow, they most grow faster everywhere else to offset Apple's customer losses in China.

"If China units are down by 5% in F17, we think the rest of world (RoW) would need to grow 10% in order to reach our 6% unit estimate. This is not unreasonable given higher growth rates in prior cycles but is not a slam dunk, so our 6% growth is on the optimistic side," Milunovich said in a recent note.

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What Apple's suppliers are saying right now about iPhone 7 sales

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Apple's iPhone supply chain manufacturers say sales of iPhone 7 will be ahead of iPhone 6s but are otherwise largely flat, say analysts Shawn Harrison and Gausia Chowdhury at Longbow Research. Apple will grow iPhone sales by about 2.5%, Longbow believes, but there are caveats to that.

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- Samsung and Apple have been losing control of the smartphone industry, facing significant decline in sales in the third quarter of 2016.

- Even with a new phone being launched, Samsung still got hit by a massive drop in market shares. This is due to the recent cases of the devices overheating and exploding.

- Although Apple has had 3 successive declines in sales as fewer consumers buy their products causing their market share to fall.

- The decline of Apple and Samsung is being replaced by 3 Chinese companies. Huawei - which is now the world's 3rd largest manufacturer, Oppo and BBK.

- Apple unlike Samsung is hoping to increase their sales again with the release of the Iphone 7

The type of market structure for the smartphone industry is oligopoly – an industry dominated by a few firms, e.g. 5 firm concentration ratio of > 50%.

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Samsung and Apple are slowly losing their duopolistic control of the smartphone market, with the world's two biggest manufacturers accounting for less than a third of all sales in recent months.

Analysts at Gartner said that both companies had seen significant falls in market share amid competition from China in the third quarter of 2016.

Samsung was hit by its biggest-ever decline, its market share falling from 23.6pc a year ago to 19.2pc amid the botched launch of its Galaxy Note 7 device.

The Korean company was twice forced to recall the device after dozens of units were found to overheat causing them to burst into flames and explode, and it ultimately cancelled production of the device last...

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Samsung and Apple's grip on smartphone market slips to less than one in three sales

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Samsung and Apple are slowly losing their duopolistic control of the smartphone market, with the world's two biggest manufacturers accounting for less than a third of all sales in recent months. Analysts at Gartner said that both companies had seen significant falls in market share amid competition from China in the third quarter of 2016.

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demand/supply - can also link to market equilibrium

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demand/supply - can also link to market equilibrium

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- We can see a drop in the demand for Apple products.

- This shows that there is a decrease in demand for Apple products which might be caused by the demand determinants. Determinants like the money income of consumers. A decrease in the money income of the consumers would mean that the demand for Apple products (normal goods) would also decrease. This also depends on the number of buyers in the market. If there is a decrease in the number of buyers, the demand for the good also decreases.

- Now that the demand is reduced, Apple is slowing down their production levels as the amount of shoppers lower dramatically.

- The determinants that cause demand to fluctuate are 'Tastes and preferences' and 'Number of buyer in the market'. It is based on tastes and preferences because sales in general for all products would decrease after the holiday season.

- However, in order to prevent an oversupply of Apple products, Apple ensures that it decreases its production as well. This ensures market equilibrium. When there is market equilibrium, the price of Apple's products would not fall as quantity demanded is equal to quantity supplied. All parties in the market are satisfied. Once equilibrium is attained, there is no tendency to change unless demand and/or supply were to change.

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Apple's reported to be slowing iPhone production by 10% during the start of 2017

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According to a report from Japanese newspaper, Nikkei; Apple is slowing down iPhone production entering Q1 of 2017, with "sluggish sales" causing the Cupertino company to retract the number of handsets leaving their manufacturing facilities. While the report claims that ...