Apple cuts current-quarter production plan for new iPhones by 10%, says Nikkei
Smartphone giant's share price shows muted reaction to report
Tokyo — Apple, which slashed its quarterly sales forecast last week, had reduced planned production for its three new iPhone models about 10% for the March quarter, the Nikkei Asian Review reported on Wednesday.
That rare forecast cut exposed weakening iPhone demand in China, the world’s biggest smartphone market, where a slowing economy was also buffeted by a trade war with the US.
Many analysts and consumers have said the new iPhones are overpriced.
Apple asked its suppliers late in December to produce fewer-than-planned units of its XS, XS Max and XR models, the Nikkei reported, citing sources with knowledge of the request.
The request was made before Apple announced its forecast cut, the Nikkei said. The bleaker sales outlook, which Apple attributed to weak China demand, triggered a broad sell-off in global stock markets.
Market research firm Canalys estimates shipments fell 12% in China in 2018 and expects smartphone shipments in 2019 to dip another 3% , to below 400-million for the first time since 2014.
Overall planned production volume of both old and new iPhones is likely to be cut to a range of 40-million to 43-million units for January-March period, from an earlier projection of 47-million to 48-million units, the Nikkei reported, citing one source familiar with the situation.
Apple did not respond to a Reuters request for comment.
The report comes after chip suppliers Samsung Electronics and Skyworks Solutions flagged weak first-quarter chip demand for smartphones.
Samsung surprised the market on Tuesday with an estimated 29% drop in quarterly profit, blaming weak chip demand in a rare commentary issued to “ease confusion” among investors already fretting about a global tech slowdown.
Apple’s iPhone suppliers include Taiwanese assemblers Hon Hai Precision Industry (Foxconn) and Pegatron Corp. Pegatron declined to comment on the report, while Foxconn did not reply to a request for comment.
There was little reaction to the report among shares of major Apple suppliers, as the market has already digested production cuts after the iPhone maker's forecast cut, analysts said.
The share price of Foxconn, the world’s biggest electronics contract manufacturer, was up 1.6% at the close, while Pegatron closed up 1.3% . Apple was up 1.3% at $152.70 in early trading on Wednesday.
Focus on India
Among iPhone component suppliers in Asia, South Korea’s LG Display closed up 0.5% , while Japan Display was flat.
“The Street is already well aware of a soft March guide so this latest report is not a new worry, as investors are starting to look ahead six-nine months down the road for Apple and gauge how the company emerges from this dark chapter of soft demand,” Daniel Ives, analyst at Wedbush Securities, said.
As Chinese demand has faltered, Apple has increased focus on India, which recently overtook the US as the world’s second-largest smartphone market.
CEO Tim Cook reiterated in an interview with CNBC on Tuesday that India was a major focus for Apple.
Reuters reported in December that Apple would begin assembling its top-end iPhones in India in 2019 through the local unit of Foxconn, quoting an informed source.