Apple cuts production orders for all three new iPhone models

Apple cuts production orders for all three new iPhone models

Decision triggered by lower-than-expected demand

Tim Cook - CEO, Apple

Tim Cook - CEO, Apple

Apple has cut production orders in recent weeks for all three iPhone models launched in September, the Wall Street Journal has reported, citing sources.

A lower-than-expected demand for the new iPhones and Apple's decision to offer more models has made it difficult to anticipate the number of components and handsets the company needs, according to the WSJ report.

Apple shocked investors a few weeks ago with a sales forecast for the Christmas quarter below Wall Street expectations, prompting certain suppliers to issue warnings that pointed to weakness in new iPhone sales.

Screen maker Japan Display cut its full-year outlook citing weaker smartphone demand, while British chipmaker IQE said it expects a material reduction in its financial performance in the current year.

Lumentum Holdings, AMS AG, companies which supply Apple with software needed for its FaceID technology, also lowered their forecasts.

Another supplier Analog Devices is expected to report fourth-quarter results before markets open on Tuesday.

Apple shares were down 3.7 per cent at US$186.38 on Monday, while Lumentum, Skyworks Solutions and Qorvo were down between 2.7 to six per cent.

Forecasts have been particularly problematic for iPhone XR with Apple cutting its production plan by up to a third of the nearly 70 million units some suppliers had been asked to produce between September and February, WSJ reported.

As recently as last week, Apple informed several suppliers that it had lowered its production plan again for iPhone XR, the WSJ said.

The company started selling its latest generation of phones, the iPhone XS and XS Max, in September and the XR model in October.

Analysts at Cowen & Co expect a modest hit from iPhone production cuts on memory chipmakers like Western Digital and Micron Technology.

The brokerage forecast a 10 cent headwind to Micron and 15 cent headwind to Western Digital in the fourth quarter of 2018 and the first quarter of 2019 on lower iPhone builds.

Micron's shares were down 3.4 per cent while Western Digital was down 1.7 per cent.

Apple did not respond to a request for comment.

(Reporting by Kanishka Singh and Arjun Panchadar in Bengaluru; Editing by Gopakumar Warrier and Shounak Dasgupta)

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