Exclusive: Apple tells vendors to produce 10% fewer new iPhones

TAIPEI – Apple cuts its current production plan for new iPhones by about 10% over the next three months, with a sign that the US smartphone manufacturer expects a further hit this year, just a week after the market raid was revealed it would go Missing earnings forecasts in late 2018.

Apple last month asked its vendors to produce fewer of their new iPhones than planned for the January-March quarter. Sources of knowledge about the request told Nikkei Asian Review. It is the second time in two months that the US company has trimmed its planned production for the flagship.

The request was made before the shock warning issued on January 2, where Apple said revenues for the last three months of the year would come in at about $ 84 billion, against previous guidance of $ 89 billion to $ 93 billion. This warning ̵[ads1]1; the first reduction in revenue guidance of 16 years – triggered stock market sales around the world, as investors feared it was a sign of a slower Chinese economy.

The latest revision to future production applies to all new iPhone models – XS Max, XS and XR, sources familiar with the case said. "The change level is different for each vendor and depends on the product mix they deliver," one of the sources said.

Another source familiar with the situation said that under the revised plan, the total planned production volume for both old and new iPhones would be reduced to about 40 million to 43 million units in the January-March quarter from a previous projection of 47 million to 48 million units.

This downturn will be a contraction of more than 20% from 52.21 million units Apple sold in January-March 2018. However, the size of the actual decline may differ slightly when inventory and demand discrepancies are taken into account. In its latest earnings call, Apple said it will stop revealing iPhone shipments from October to December.

Apple could not be reached for comments.

Apple suffers from a mature smartphone market and the impact of the trade war between the United States and China, although most of the products are not yet subject to additional US tariffs on Chinese goods. "We do not anticipate the size of the economic deceleration, especially in larger China," said Apple CEO Tim Cook in a letter to investors as he announced revenue cuts. "We believe that the economic environment in China has been further influenced by growing trade tensions with the United States."

Its problems have been recorded in the broader supply chain. Among leading Taiwanese iPhone vendors, camera object supplier Largan Precision was the first to respond to Apple's sales rating. In a regular monthly statement, Largan stated on January 5 that sales in December fell 34% year-on-year and fell 20% from November. Revenue of $ 3.22 billion ($ 105 million) marked its worst sales result in December since 2013.

Metal supplier Catcher Technology on Monday said it expects sales in the current January-March quarter to decline from the previous year. Catcher saw the revenue space 28% in December from the year before. Of the new iPhone models, Catcher produces mostly metal frames and makes glass mounting for XR. It delivers a small portion of the frames used in XS Max.

. "We expect market conditions at the end of 2018 to continue into 2019," Catcher said in a statement to investors, calling the conditions "challenging" and describing demand prospects as "very uncertain and volatile."

At the beginning of November, Nikkei first reported that Apple had told its main installer Hon Hai Precision Industry and Pegatron to interrupt a scheduled production increase for XR and notified smaller vendor Wistron that it did not need to stand as a buffer for manufacturing the device, least expensive of the three new iPhones released last year.

At that time, XR had been on store shelves for just over a week. Following the Nikkei report, Apple vendors – including Cirrus Logic, AMS, Qorvo and Lumentum – deliver all the October-December revenue estimates.