Apple 'may cut iPhone production by 30%'

The Nikkei Asian Review says inventories of Apple's iPhone 6s and 6s Plus have piled up since they were launched last September, prompting production to be scaled back to let dealers go through their current stocks.
The Nikkei Asian Review says inventories of Apple's iPhone 6s and 6s Plus have piled up since they were launched last September, prompting production to be scaled back to let dealers go through their current stocks.PHOTO: REUTERS

TOKYO/TAIPEI • Apple is expected to cut output of its latest iPhone models by about 30 per cent in the January-March quarter due to mounting inventories, the Nikkei Asian Review reported yesterday, rattling the nerves of investors in the US giant's Asian suppliers.

Rival tech giant Samsung Electronics is expected to see profit drop this year, as slowing demand for consumer electronics saps momentum for its less glamourous parts businesses that offset last year's smartphone struggles.

Bucking the trend, however, is Huawei Technologies, which has become the first Chinese handset vendor to ship more than 100 million smartphones annually.

The Nikkei report said inventories of the iPhone 6s and 6s Plus have piled up since they were launched last September, prompting production to be scaled back to let dealers go through their current stocks.

"This is an eye-opening production cut which speaks to the softer demand that Apple has seen with 6s out of the gates," FBR Capital Markets analyst Daniel Ives said. "The Street was bracing for a cut but the magnitude here is a bit more worrisome."

FIERCE COMPETITION

It's a bit of a dog fight within the Android ecosystem. Huawei's going after Xiaomi and all the other smaller Android players.

MS CAROLINA MILANESI, Kantar Worldpanel ComTech analyst

The report prompted a 2.5 per cent drop in Apple shares, which have lost about a quarter of their value from record highs in April. Shares in the mainly Asian makers of the iPhones' screens and chips were also sharply lower.

Apple was not immediately available for comment but some Taiwanese suppliers pointed to falling sales, a rare holiday break and a government subsidy as evidence of the gloomy outlook. "The slowing down of the market is the truth," one supplier said.

In China's Henan province, the Zhengzhou city government said this week that it had awarded 82 million yuan (S$18 million) in subsidies to companies under Foxconn, a major iPhone assembler, which suggests that the government is concerned about the firm's ability to maintain its workforce.

Foxconn declined to comment. Its shares closed down 0.1 per cent yesterday. Other suppliers such as Japan's Murata Manufacturing, Alps Electric and TDK fell by 3 or 4 per cent. Production is expected to return to normal in the April- June quarter, Nikkei reported.

In South Korea, Samsung chief executive Kwon Oh Hyun warned that the firm faced challenges from weak global growth and heightened uncertainties stemming from factors such as financial risks for emerging markets.

Separately, Shenzhen-based Huawei yesterday said its smartphone shipments rose 44 per cent annually to 108 million in 2015, thanks to strong sales in China and Western Europe.

However, its share of the smartphone market was just 7.5 per cent in the third quarter, after Samsung's 23.8 per cent and Apple's 13.5 per cent, according to research firm IDC.

Analysts said it was too early to say if Huawei could become a serious rival to the giants. "It's a bit of a dog fight within the Android ecosystem," said Kantar Worldpanel ComTech analyst Carolina Milanesi. "Huawei's going after Xiaomi and all the other smaller Android players."

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on January 07, 2016, with the headline 'Apple 'may cut iPhone production by 30%''. Print Edition | Subscribe