Ten percent cut in production run for current iPhone handsets over next three months, due to weak demand
Apple has underscored the seriousness of the slowdown of iPhone sales, after it was reported that the firm has reduced its planned production for its current three new iPhone models.
The report in the Nikkei Asian Review said that Apple has reduced its production run by about 10 percent for the January-March quarter.
It comes after Apple shocked investors when it warned of a “magnitude of the economic deceleration, particularly in Greater China,” that forced it to lower its revenue forecast for its fiscal first quarter (ending 29 December) to $84bn (£67bn) – down from its original forecast of $89bn to $93bn.
According to the Nikkei Asian Review report, this is second time in two months that Apple has asked its suppliers to produce fewer numbers of its XS, XS Max and XR models than planned.
It is reported that the overall planned production volume of both old and new iPhones will be reduced to about 40 million to 43 million units for the January-March quarter, down from an earlier projection of 47 million to 48 million units.
Apple apparently made the production reduction request before it warned Wall Street of its revenue shortfall.
That warning – the first reduction in revenue guidance in 16 years – triggered a sell-off in stock markets around the world as investors fretted about a slowdown in the Chinese economy.
Matters were not helped this weak when mobile rival Samsung Electronics issued a profits warning, which added to investor concerns of a tech slowdown, in the midst of a growing trading war between the United States and China.
Earlier this week Apple CEO Tim Cook was clear in blaming the slowdown in the Chinese market for its lowered outlook.
“Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to our guidance and for much more than our entire year-over-year revenue decline,” Cook said.
But there is little doubt that Apple is feeling the affects of stiff competition in the smartphone area from the likes of Samsung and Huawei.
The arrest in early December 2018 of Huawei’s chief financial officer Meng Wanzhou in Canada at the US’ request, as well as President Donald Trump’s aggressive posturing on trade, is also said to have driven a spike in Huawei sales in China as Chinese consumers reacted to the US move by purchasing Chinese handsets instead.
But the elephant in the room also continues to be Apple’s decision to stick with its hefty premium pricing strategy for its flagship handsets, despite the risk of a slower economy and smartphone saturation.
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