Apple Inc has notified suppliers that it will halve its iPhone X production target for the first quarter to around 20 million units, Nikkei reported on Monday without citing a source.
Details through the supply line come from Nikkei Asian Review, which suggests that iPhone X manufacturing will be cut by fifty percent this quarter. This is on top of Samsung’s reduction in OLED production for Apple’s smartphone. Apple had planned to manufacture 40 million units in Q1. 20 million now looks like a more realistic target.
How bad it is?
The report by Nikkei Asian Review on Monday indicated that Apple plans to produce 20 million iPhone X units in the first half of this year, half of the 40 million originally expected. While it’s not unusual for Apple to shift production schedules, it does sound like a dramatic shift for a flagship phone, a shift Nikkei attributes to soft holiday sales.
The report followed similar predictions from analysts at J.P. Morgan, Bernstein and KGI, who questioned whether Apple could fulfill predictions of an iPhone “supercycle” this spring. It all comes amid an iPhone cycle that’s been unusually difficult to track, thanks to the release of three new phones this fall, and the staggered launch of the iPhone X.
Apple shares were down 2 percent on Monday morning, and 5 percent lower over the past week.
But it’s still going good
Analysts surveyed by FactSet expect Apple to report 79 million iPhone unit sales in the December quarter, up from 78 million in the year-ago period. The average selling price will show a more dramatic increase, hitting $737, up from $694 the prior year, analysts predict.
Between January and March, Wall Street expects Apple’s total iPhone sales to grow to 60 million units, up from 51 million the prior year. And the average selling price is expected to hit $750, up from both the December quarter’s $737 and from the $664 average selling price in March 2017. In fact, average selling prices are projected to be above $740 through December 2018, the estimates say.
So what’s the confusion?
Apple only traditionally provides forward guidance on a couple of numbers: revenue, gross margin, operating expenses, other income and tax rate. That leaves Wall Street trying to piece together the rest.
Revenue, gross margin and operating expenses may be the only areas where analysts can get clues for the March quarter and beyond — the other two areas may be affected by Apple’s recent announcements that it would pay tax on overseas cash and up domestic investments.
According to FactSet, revenue for the current quarter is expected to be about $66.54 billion. On average, Apple has beat its sales guidance by about 3.3 percent over the past 3 years, FactSet says.
In the end it all comes down to the fact that Apple is cutting down its production of iPhone X by almost 50% which is not what the company is known for.