Apple slashes 10% production during 2019’s first quarter

Apple slashes 10% production during 2019’s first quarter

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Citing sources close to the matter, Nikkei Asian Review on Wednesday said Apple last month asked partner suppliers to manufacture fewer iPhones than originally planned for the three-month period ending in March. According to the publication, the recent supplier update marks Apple’s second request to draw down production in as many months.

The revision reportedly affects all new model iPhones, which include the iPhone XS, XS Max and XR. Old models are also impacted, with the company now targeting production of between 40 million to 43 million total iPhone units for the first quarter, down from earlier estimates of 47 million to 48 million units, the report said.

Apple Inc which slashed its quarterly sales forecast last week, has reduced planned production for its three new iPhone models by about 10% for the January-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 has also been buffeted by a trade war with the United States.

Many analysts and consumers have said the new iPhones are overpriced.

Apple asked its suppliers late last month 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 last year and expects smartphone shipments in 2019 to dip another 3%, to below 400 million for the first time since 2014.

“The level of revision is different for each supplier and depends on the product mix they supply,” a source said.

Today’s reported estimates represent a 20% year-over-year contraction from the 52.2 million iPhones sold in the second fiscal quarter of 2018.

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, from an earlier projection of 47 million to 48 million units, the Nikkei reported, citing one source familiar with the situation.

Apple did not immediately respond to a Reuters request for comment.

The report comes after chip suppliers Samsung Electronics Co Ltd and Skyworks Solutions Inc flagged weak first-quarter chip demand for smartphones.

Apple’s iPhone suppliers include Taiwanese assemblers Hon Hai Precision Industry Co Ltd (Foxconn) and Pegatron Corp. Pegatron declined to comment on the report when contacted by Reuters, while Foxconn did not immediately 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.

Shares of Foxconn, the world’s biggest electronics contract manufacturer, were up 1.6 percent while Pegatron was up 1.3%.

Among iPhone component suppliers in Asia, South Korea’s LG Display Co Ltd was up 0.5%, while Japan Display Inc was flat.

As Chinese demand has faltered, Apple has increased focus on India, which recently overtook the United States as the world’s second-largest smartphone market.

Chief Executive Tim Cook reiterated in an interview with CNBC on Tuesday that India was a major focus for Apple.

Reuters reported last month that Apple will begin assembling its top-end iPhones in India through the local unit of Foxconn this year, citing a person familiar with the matter.

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