Apple ditches iPhone production increase after demand falters

Apple had upgraded its sales projections in the weeks leading up to the iPhone 14 release. PHOTO: BLOOMBERG

TAIPEI - Apple is backing off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialise, according to people familiar with the matter.

The US tech giant has told suppliers to pull back from efforts to increase assembly of the iPhone 14 product family by as many as six million units in the second half of this year, said the people. Instead, the company will aim to produce 90 million handsets for the period, roughly the same level as the prior year and in line with Apple's original forecast this summer, the people said.

Demand for higher-priced iPhone 14 Pro models is stronger than for the entry-level versions, according to some of the people. In at least one case, an Apple supplier is shifting production capacity from lower-priced iPhones to premium models, they added.

US stock-index futures turned lower after the news, with contracts on the Nasdaq 100 falling as much as 1.3 per cent. Key chipmaker Taiwan Semiconductor Manufacturing Company fell as much as 1.8 per cent, Apple’s biggest iPhone assembler Hon Hai Precision Industry was down as much as 2.4 per cent, and specialised producers Largan Precision and LG Innotek both slumped by more than 7 per cent.

Apple had upgraded its sales projections in the weeks leading up to the iPhone 14 release, and some of its suppliers had started making preparations for a 7 per cent boost in orders. 

An Apple spokesman declined to comment.

China, the world's biggest smartphone market, is in an economic slump that has hit its domestic mobile device makers and also affected the iPhone's sales. Purchases of the iPhone 14 series over its first three days of availability in China were 11 per cent down on its predecessor the previous year, according to a Jefferies note on Monday.

Global demand for personal electronics has also been suppressed by surging inflation, recession fears and disruption from the war in Ukraine. The smartphone market is expected to shrink by 6.5 per cent this year to 1.27 billion units, according to data from market tracker IDC.

"The supply constraints pulling down on the market since last year have eased and the industry has shifted to a demand-constrained market," said research director Nabila Popal at IDC. "High inventory in channels and low demand with no signs of immediate recovery has OEMs (original equipment manufacturers) panicking and cutting their orders drastically for 2022." BLOOMBERG

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