Apple said to slash iPhone production by 30% in Q1, shares of Asian suppliers fall

A man looking at his iPhone 6 Plus.
A man looking at his iPhone 6 Plus. PHOTO: AFP

TOKYO (BLOOMBERG) - Shares of Apple Inc suppliers led by Sharp and Pegatron fell on Wednesday (Jan 6) after Nikkei Asian Review reported the US company would cut the first quarter output of its latest iPhones by about 30 per cent.

Sharp dropped 2.5 per cent as of the midday trading break in Tokyo and Japan Display slumped 2.9 per cent. The Japanese companies both supply screens for Apple devices. Pegatron, which assembles iPhones, fell 5.8 per cent as of 10.40am in Taipei.

Inventories of the new iPhones, which debuted in September, have piled up at retailers in China and Europe amid lackluster sales as an increase in the dollar against emerging markets currencies makes the device more expensive in those countries, Nikkei reported.

Apple had initially told suppliers to keep production of the iPhone 6s and 6s Plus models for the January-March period at the same level as for their predecessors, the publication said.

"There is a risk inventory adjustment will continue and will not be over by March," said Mr Yasuaki Kogure, chief investment officer at SBI Asset Management Co.

TDK Corp dropped 4 per cent and Hon Hai Precision Industry Co declined 1.8 per cent. Samsung Electronics Co fell 3.2 per cent in Seoul and Taiwan Semiconductor Manufacturing Co was 1.8 per cent lower.

Towards the end of 2015, many analysts began predicting that sales of Apple's best-selling product would slump in 2016, based on supply chain issues and weaker demand especially from saturated, developed markets. Apple's growth is increasingly dependent on demand for iPhones, while iPad tablet sales decline and adoption of the Apple Watch remains modest. Apple predicted in October that it would have another record holiday quarter.

"With poor end demand for iPhone 6s in developed markets, we estimate that the supply chain has accumulated 20 million units of iPhone inventory including finished goods and components," Mr Ken Hui, an analyst at Jefferies Group LLC in Hong Kong, wrote in a report.