Apple Cuts New iPhone Production by 30 Percent
- Paul Thurrott
- Nov 19, 2018
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An explosive new report in the Wall Street Journal says that Apple has cut production of all three new iPhones by 30 percent. This news piles on previous reports which had suggested the cuts applied only to the iPhone XR.
Citing multiple sources, the publication says that Apple has cut orders for “all three of the iPhone models that it unveiled in September”—meaning the iPhone XS, iPhone XS Max, and the iPhone XR. As result, the firm has asked component suppliers to reduce production by up to 30 percent.
Apple had originally expected to sell about 70 million iPhones between September and February. So this production reduction suggests that the firm will now sell only about 50 million of the handsets.
The news comes in the wake of multiple reports about specific iPhone suppliers seeing Apple reduce its orders in recent weeks. In the first week of November, Nikkei reported that demand for the iPhone XR was “disappointing,” causing Apple to halt plans to ramp up extra production of the handset. Then, a week later, Lumentum, which supplies FaceID components for the iPhone XS, XS Max, and XR, lowered its profit and revenue forecasts thanks to reduced orders from Apple.
Apple’s market value has plunged this month thanks to these reports: Its market cap is $918 billion at the time of this writing, far below the $1 trillion it had hit in August. But it’s now clear that the consumer electronics giant saw this plunge coming: When it announced its latest quarter earnings statement in October, Apple said that it would no longer report unit sales figures for iPhone, iPad, and the Mac, a key metric for determining how well these products are faring in the market.
As bad, Apple has suffered from a serious decline in product quality over the past few years. And its inability to deliver the products that its customers want—at prices they can afford—is perhaps finally started to have its impact as well.
Given all this, Apple’s decision to raise prices across the board by 20 percent—which I call Apple Jacked—might have come at exactly the wrong time.
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Conversation 75 comments
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Bats
<p>The reason for this is crystal clear. It's price. Not quality, but price. Not just that, but they're hasnt been much reason for anyone to upgrade their phones. Hopefully this leads to Apple cutting the price of the iPhones, because surely the Android leaders Samsung and Google will follow suit, as well as the others.</p>
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provision l-3
<p>So we go through this every year right? I mean these reports come out like clockwork and Paul reports on them with such exuberance and then they just turn out to be bunk and then Paul has to print a retraction ….. oh wait, that last part doesn't happen. </p><p><br></p><p>Anyway, I guess that this time it could be true that iPhone sales are tanking. That is certainly within the realm of probability.</p><p><br></p><p> I do find it odd that in face of that of such a massive short fall Apple has not warned that they will miss their finical guidance for the current quarter. Something the SEC requires them to do. It's also odd that only had handful of Apple's 200+ suppliers have reported any impact from such a massive short. Even more odd, Lumentum doesn't even show up as a supplier on Apple 2018 supplier list which make up 98% of Apple's procurement expenditures. </p><p><br></p><p>images. apple .com/supplier-responsibility/pdf/Apple-Supplier-List.pdf</p><p><br></p><p>But again, the reports could be true this time even if somewhat questionable. </p><p><br></p><p><br></p>
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provision l-3
<blockquote><em><a href="#370479">In reply to MikeGalos:</a></em></blockquote><p>Just to be clear, you are picking a single quarter for your data points and drawing broader conclusions which seems like a dubious way to do things but your cherry picking of data is really irrelevant to my point. </p><p><br></p><p>What we go though every year (for at least the last 4-5) is a new iPhone comes out and Nikkei publishes a report that said iPhone isn't doing well as expected due to reports from a supplier or two. Said report gets repeated here and elsewhere without the simplest of analysis done to see if it makes sense. You know, like seeing if the supplier mentioned is even an Apple supplier. </p><p><br></p><p> Then Apple manages to meet its quarterly guidance and it turns out all the reports were bunk. </p><p><br></p><p>I don't think the it is a stretch to say that if Apple had to cut orders by 30% then that would have a finical impact on Apple. How could it not? The entire narrative is that Apple had to raise prices to meet its financials. So, Apple is heavily depended on iPhones for revenue, had to raise prices to meet finical growth, is now coming up 30% on sales but has not had to issue a warning that they will not meet their financial guidance for the quarter as required by the SEC. </p><p><br></p><p>The possible explanations at this point are: Apple has opted to violate SEC rules, Some other product has miraculously taken off and no one has noticed or someone has drawn incorrect conclusions from a small number of supply chain data points. </p><p><br></p><p>As I said before (twice), it could be happening. Apple's iPhone sales may have dropped by 30% but I don't think a reasonable assessment points to that. </p><p><br></p><p><br></p>
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PeterC
<blockquote><em><a href="#369858">In reply to red.radar:</a></em></blockquote><p><span style="color: rgb(0, 0, 0); background-color: transparent;">apple are some $74 billion invested into a $100 billion share buyback in the last year and "supplier slowdown announcements" always affect share price, funny that. </span></p><p><br></p><p><span style="color: rgb(0, 0, 0); background-color: transparent;">If apple are truly tanking, and they might be, we will see in Q1 revenue. Its their Q1 trading that always been their annual highpoint. </span></p><p><br></p><p><span style="color: rgb(0, 0, 0); background-color: transparent;">Ok no handset numbers will make life difficult for simple arithmetic, but there's always a way to benchmark. And… you know i'd watch wiley Tim Cook, everyone is stating that apple not giving handset sales numbers is because of possible handset declines etc. The thing is, it ALSO hides component use/demand. </span></p><p><br></p><p><span style="color: rgb(0, 0, 0); background-color: transparent;">The fact they're going to give intel the boot from their modem chip supply (they've already booted Qualcomm) tells you they intend to maintain and increase margin there. We know theyre heavily invested in their own screen tech manufacture too, A series chips already etc etc. </span></p><p><br></p><p><span style="color: rgb(0, 0, 0); background-color: transparent;">A company whose going to transition to its own component design/supply in many key areas isn't going to "announce its" demand publicly. They want to make double bubble wherever they can, higher margin, and they aint going to tell their competition how, what why or where they do it…. why would you, I wouldn't. </span></p><p><br></p><p><span style="color: rgb(0, 0, 0); background-color: transparent;">The 3 big players make a lot of their own components/chips/screens – its where this is won or lost.</span></p>
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PeterC
<blockquote><em><a href="#369909">In reply to red.radar:</a></em></blockquote><p>Exactly. </p>
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PeterC
<blockquote><em><a href="#370028">In reply to the_real_entheos:</a></em></blockquote><p>Yes now that would be interesting ?</p>
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skane2600
<p>I'm just glad we never jumped on the iPhone bandwagon in the first place. We didn't buy the kids smartphones until they were teenagers and then only cheap ones.</p>
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skane2600
<blockquote><em><a href="#369870">In reply to NazmusLabs:</a></em></blockquote><p>Not every kid is determined to get into trouble. If you want your kids to have a very restrictive environment it's more effective and cheaper to just buy them a feature phone. Not much point in buying an expensive phone just to disable its features.</p>
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PeterC
<p>Hmmm, come on Paul. All smartphone sales are declining. Chinese market declining too. Apple, Samsung, LG etc all declining. Google doesn’t even feature on the lists! </p><p><br></p><p>The only brands growing are Huawei (+41% YOY) and Xiaomi (+43% YOY) mainly through taking Chinese market share from others. LG are toppling in my opinion (-24% YOY) and Samsung are being very very squeezed (-11% YOY). Apple (+1% YOY).</p><p><br></p><p>The age of mobile choice is disappearing fast. We will have Less handsets, higher prices, more expensive services and longer carrier term contracts…… sound familiar? just look at the content streaming market. Everyone’s building their walled garden to ride out the upcoming financial troubles. Buckle up.</p><p><br></p><p>***edited with some year on year growth figures. </p><p><br></p>
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PeterC
<blockquote><em><a href="#369838">In reply to Shane:</a></em></blockquote><p>No, I just watch business data. A lot. </p><p>the interesting thing to consider is who benefits from such a market cycle, whilst always keeping an eye on market share price manipulations too. </p><p>The 3 main brands all make their own handset chips, and each is very busy differentiating their offering through their silicon designs. This is the area to watch. </p>
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PeterC
<blockquote><em><a href="#369864">In reply to Daekar:</a></em></blockquote><p>I think it depends on local region, but broadly yes I do see it. The “after-market enthusiast” business will likely boom even more in the upcoming years. It’s like cyanogen threw in the towel too soon, someone’s going to deliver a healthy business in after market ROMs one day, that actually makes money. I keep telling my son… learn how to make a custom rom and do this …… he doesn’t listen, but hey who does!!! ?</p><p><br></p><p><br></p>
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innitrichie
<p>I don't think it's a coincidence this is the first year in a long time that they released an iOS update that made older devices faster and more usable, as some form of apology for the throttling fiasco. I am sure this will have made a considerable number of people think they don't really need to buy a new $1,000 phone this year. Next year Apple will fix this problem.</p>
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skane2600
<blockquote><em><a href="#369957">In reply to JG1170:</a></em></blockquote><p>Is iMessage really that much of a big deal? </p>
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