Apple cuts current-quarter production plan for the new iPhones by 10 percent: Nikkei

(Reuters) – Apple Inc (AAPL.O), which captured its quarterly sales forecast last week, has reduced the planned production for the three new iPhone models by about 10 percent for the January-March quarter, the Nikkei Asian Review reported on Wednesday.

FILE PHOTO: People looking at iPhones on the World Trade Center Apple Store during a Black Friday sales event in Manhattan, New York City, united states, Nov. 23, 2018. REUTERS/Andrew Kelly/File Photo

That rare forecast cut exposed the weakening of the iPhone demand in China, the world’s largest smartphone market, where a slowing economy has also been ravaged by a trade war with the United States.

Many analysts and consumers have said that the new iPhones are too expensive.

Apple asked its suppliers at the end of last month to produce less-than-planned-units of the XS, XS, Max and XR models, the Nikkei reported, quoting sources with knowledge of the request.

The request was made before Apple has announced that the forecast cut, the Nikkei said. The gloomier sales outlook, Apple, and attributed to weak China demand, triggered a broad sell-off in the global equity markets.

Market research firm Canalys estimates shipments fell 12 percent in China last year and expects smartphone shipments in 2019, dive another 3 per cent, to under 400 million for the first time since 2014.

The total planned production volume of both the old and the new iphone will probably be reduced to a range from 40 million to 43 million units for the January-March period, from a previous forecast of 47 million to 48 million units, the Nikkei reported, citing a source familiar with the situation.

Apple has not responded to a Reuters request for comment.

The report comes after chip suppliers, Samsung Electronics Co Ltd (005930.KS) and Skyworks Solutions Inc (SWKS.O) marked a weak first quarter chip demand for smartphones.

Samsung surprised the market on Tuesday with an estimated 29 percent drop in quarterly profit, blaming weak chip demand in a rare comment issued to “ease confusion among investors already fretting about a global tech slowdown.

Apple’s iPhone suppliers are Taiwanese assemblers Hon Hai Precision Industry Co Ltd (Foxconn) (2317.TW) and Pegatron Corp (4938.TW)). Pegatron declined to comment on the report when contacted by Reuters, while the Foxconn does 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.

Shares of Foxconn, the world’s largest electronics contract manufacturer, closed 1.6 percent, while Pegatron closed up 1.3 percent. Apple shares were up 1.3 percent to $152.70 in early trading on Wednesday.

IPhone component suppliers in Asia, South Korean LG Display Co Ltd (034220.KS) closed down 0.5 percent, while Japan Display Inc (6740.T) was flat.

“The Street is already well aware of a soft March guide, so this latest report is not to create a new, as investors begin to look ahead 6-9 months down the road for Apple, and to estimate how the company emerges from this dark chapter of soft demand,” Daniel Ives, an analyst at Wedbush Securities, said.

If the Chinese demand stagnated, Apple has an increased focus on India, which recently overtook the United States as the world’s largest smartphone market.

Chief Executive Tim Cook stressed in an interview with CNBC on Tuesday that India was an important focus for Apple.

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

Reporting by Chris Gallagher and Makiko Yamazaki in TOKYO, Sayantani Ghosh in SINGAPORE and Vibhuti Sharma in BENGALURU; Additional reporting by Jessica Macy Yu in TAIPEI; Editing by Christopher Cushing and Arun Koyyur

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