A report published in Nikkei Asian Review on Wednesday claimed that for the January-March quarter, Apple Inc has reduced its target production for its three new iPhone models by about 10 per cent. Earlier last week, the US tech giant had reduced its quarterly sales forecast which resulted in a fall in its stocks and rocked the market – especially the tech stocks.
According to Apple, this first profit and revenue warning from Apple was because of reduced demand for new models of iPhones in its crucial market of China – which is the largest smartphone market in the world. The Chinese economy is not facing a slowdown and its troubles have been compounded with the impact of the ongoing trade war with the United States.
According to many analysts and consumers, the prices of the new iPhones are more than the consumers can easily afford.
According to the report published in Nikkei, based on sources with knowledge of the matter, the suppliers of Apple were instructed last month to manufacture lesser than planned units of its XS, XS Max and XR models.
The report also said that the instructions to the suppliers were made before Apple announced the revenue warning. A broad sell-off in global stock markets was triggered by the lower forecast on revenues by apple partly mostly because of weak China demand.
Last year, there was a 12 per cent drop in shipments last year in China, estimates market research firm Canalys. The firm also expects another 3 per cent dip in the smartphone shipments in 2019, taking the number to below 400 million – which is the lowest for the iPhone makers since 2014.
According to the Nikkei report, compared to from an earlier projection of 47 million to 48 million units for the January-March period, Apple has set a target for production volume of anything between 40 million to 43 million units for both old and new iPhones.
There were no comments available in the media from Apple.
The Nikkei report assumes importance in the light of warning of weak first-quarter chip demand for smartphones was issued by chip suppliers Samsung Electronics Co Ltd and Skyworks Solutions Inc.
On Tuesday, South Korean tech giant Samsung announced an estimated 29 per cent fall in quarterly profit and pinning the blame on reduce d chip demand. The company said that the prediction were issued to “ease confusion” among investors amidst concerns of a slowdown in global tech industry.
Taiwanese assemblers Hon Hai Precision Industry Co Ltd (Foxconn) and Pegatron Corp are among the suppliers of Apple’s iPhone. There were no comments from Pegatron and Foxconn.
The report however had little impact on the stocks of the company as the investors had already factored in the possible cuts in production of analysts following the revenue warning.
“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 6-9 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.
(Adapted from ChannelNewsAsia.com)