Report: Apple Cuts iPhone Production Another 10 Percent

Posted on January 9, 2019 by Paul Thurrott in Apple, iOS with 18 Comments

A new report claims that Apple has cut production of new iPhones by another 10 percent in the wake of its blockbuster sales warning.

The Nikkei Asian Review, which was among the first to publicize warnings about new iPhone sales last fall, reports that Apple has cut new iPhone production a further 10 percent for the entire first quarter of 2019. This new cut falls outside of the time frame for last week’s blockbuster warning to investors from Apple CEO Tim Cook, which covered the fourth quarter of 2018. It is perhaps interesting—and legally problematic—that that letter never addressed ongoing problems.

Citing sources at Apple’s suppliers, Nikkei says that the consumer electronics giant asked those supplies late last month for further cuts in the production of key iPhone components. This, the publication says, is the second time it’s explicitly lowered the production of its new, flagship iPhones. And it applies to all of them, the iPhone XS, XS Max, and XR.

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

Apple originally planned to ship up to 48 million old and new iPhones in the first quarter of 2019, but with the cuts, it will now ship 40 to 43 million units. That’s a drop of at least 10 percent. But it’s also a drop of over 20 percent when you look at the 52.21 million iPhones that Apple sold in the year-ago quarter. And that, of course, is why Apple will no longer provide unit sales numbers.

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Comments (18)

18 responses to “Report: Apple Cuts iPhone Production Another 10 Percent”

  1. proesterchen

    I'd take a phone off their hands ... at the right price. :D

  2. neptune.rising

    Ouch. Too expensive for the minor upgrades.

  3. Ezzy Black

    While I don't think we've plateaued for phones of all kinds, perhaps we've reached a peak for flagship or near-flagship phones. Like the PC market, the rate of advance in hardware has slowed to small increments which just aren't a good value proposition to consumers. Spending a thousand dollars, like a new PC ten years ago, to get a few percent increase in performance or a modest gain in screen resolution just doesn't make a lot of sense. At some point what you have is doing everything you need it to do.

    I don't see this a necessarily an Apple specific thing, though they are the biggest player in the game, at least monetarily, so they get the big press.

  4. AnOldAmigaUser

    I think trouble in China is likely to continue for Apple. The Chinese are justifiably proud of homegrown companies like Huawei and Oppo, and their phones are more than competitive with the iPhone in both features and design. The cost doesn't help either.

    Add a trade war to stoke nationalism, and I do not see many American firms growing sales in China.

    • ommoran

      In reply to AnOldAmigaUser:

      That they are. And there is an interesting sidebar to the China story, and I don't know if it's getting any further press in the US (it did for about 12 seconds), but it is getting press here in Canada and China, and directly relates.

      As a result of an extradition request from the US, Canadian Customs Officials detained Huawei's CFO in Vancouver, BC in early December. The hearing won't take place until February. China has now been nice enough to relocate a couple of Canadian citizens to government run facilities with occasional consular access - but won't say it's retaliation.

      Chinese state media (aka: Trump wishes he had journalists like these) are whipping anti-Canadian sentiment, and there has been a direct uptick (apparently) of all homegrown products, but especially Huawei. Given how long the hearings will take, that may continue.

      I'm surprised Tim Cook didn't mention that when looking for something to blame; then again, he didn't want to anger China, which would take a further dim view on Apple.

      Anyway, it's likely not as connected as all that, but it is connected and tied up in this whole thing.

      • AnOldAmigaUser

        In reply to ommoran:

        Yes, the case of the Huawei CFO did get coverage here, but has not gotten as much lately. I knew that at least one Canadian had become an unwitting guest of the Chinese government, but not the second.

        Surprised that they are going after Canadians though. Personally, if I were a US executive with plans to travel to China...I would be postponing them indefinitely.

  5. lvthunder

    legally problematic? Really. The letter just addressed them missing for the quarter. The earning call will talk about the next quarter. It doesn't take a genius to read Tim Cook's letter and say the issues brought up are going to be around for a while. Samsung also isn't going to hit their numbers either so this just isn't an Apple story. It's an economic story.

  6. iantrem

    I know Apple cited China as the main reason for the sales drop (40 million isn't "poor sales" by any means") but it would be interesting to know if the % drop in sales was different in Europe compared to the rest of the world. The latest batch of Apple products were, for the first time I remember, priced higher in Europe than they were in the US - even taking into account taxes and currency variations. Usually the prices have been quite similar. I wonder if Europe took note of this and thought, "nah!"

    • wright_is

      In reply to iantrem:

      Apple products have always been way more expensive in Europe than the USA. At least in Germany and the UK. We are paying around $1324 for the entry level Xs at the moment, $1440 for the entry level Xs Max. The XR is $978.

      MacBooks aren't much better, the MacBook Air starts at $1555.

      But that has always been the case, I think 2017 the iPhone X also started at around $1200 for the entry level, my daughter bought a MacBook Pro 15" in 2017 and she bought a low end model, but that was nearly $3000.

      In 2007, I bought an iMac, its price was around $400 more than the US price, even with an educational discount.

      Back in the 80s and early 90s, Apple kit cost twice as much in the UK as in the USA, so 30% - 40% more expensive than the USA prices seemed like a bargain, in the last decade.

      Given that the carriers haven't subsidised the phones, or only a minimal subsidy, in the last 5 years, it is no surprise that Apple's share has sunk. When I started my current job, I got a company mobile phone and they paid 250€ towards the cost of the phone, which meant the iPhone SE was just within the limits, the iPhone 6 needed an additional 100€ out my own pocket, the iPhone 8 400€ and the iPhone X 600€ additionally, over and above what the company paid. Who is going to pay that out of their own pocket for a company phone? I took a Hauwei P20, which came in 40€ under budget.

      • bsd107

        In reply to wright_is:

        “Back in the 80s and early 90s, Apple kit cost twice as much in the UK as in the USA, so 30% - 40% more expensive than the USA prices seemed like a bargain, in the last decade.”

        Ahhh... I remember those days, although a lot of that had to do with the relative economies, taxes, etc. I don’t think it was an Apple-only problem (IBM, Commodore, Sony Walkmans, etc machines had equal price offsets)

      • jdjan

        In reply to wright_is:

        You're not accounting for taxes. In the US the quoted price never show sales tax ~10%. In EU they include it and in many cases it is ~20%. I'm not saying you are wrong but the difference isn't nearly as much as you think.

        • wright_is

          In reply to jdjan:

          Even if the US prices were 10% higher, taking into account tax, that still makes them 20 - 30% more expensive in Europe. And when I visited the States, I was in Delaware, which didn't have sales tax...

  7. markdmetzger

    This is good news for the consumer long-term. Apple priced a product, the market said "no", whether due to price point, not enough innovation, or a combination of the two, and now Apple will have to rethink their price point going forward.

  8. Yaggs

    This is an innovation problem... your just not getting your monies worth upgrading from an iPhone 8 to X, XS, XR... or even from an iPhone 6s or 7 to one of the new models... but it isn't just Apple... my daily is a Pixel 2XL... I see NO benefit to upgrading to a newer Pixel, and I would imagine neither do most of the Galaxy S8 users out there...

  9. blackcomb

    I guess Apple is the next Nokia...