Apple cuts current-quarter production plan for new iPhones by 10%

NEW YORK (Reuters): Apple Inc (AAPL.O), which slashed its quarterly sales forecast last week, has reduced planned production for its three new iPhone models by about 10 percent 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 percent in China last year and expects smartphone shipments in 2019 to dip another 3 percent, to below 400 million for the first time since 2014.

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

Apple did not respond to a Reuters request for comment.

The report comes after chip suppliers Samsung Electronics Co Ltd (005930.KS) and Skyworks Solutions Inc flagged 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 commentary issued to “ease confusion” among investors already fretting about a global tech slowdown.

Apple’s iPhone suppliers include 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 Foxconn did 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 biggest electronics contract manufacturer, closed up 1.6 percent, while Pegatron closed up 1.3 percent. Apple shares were up 1.3 percent at $152.70 in early trading on Wednesday.

Among iPhone component suppliers in Asia, South Korea’s LG Display Co Ltd (034220.KS) closed up 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 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.

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 this year through the local unit of Foxconn, citing a person familiar with the matter.