Apple to halve iPhone X production target

Apple to halve iPhone X production target

Apple will halve its iPhone X production target for the first three months of the year to around 20 million units, the Asian Nikkei publishing company has reported, sending its shares down around 2.6% at one stage in the latest session.

The report added to growing concerns around weak sales of the $999 (€800) phone, making investors jittery about the company’s financial outlook when it reports first-quarter results on Thursday. Apple shares fell to their lowest level in 2018, knocking off $14bn (€11.26bn) from the company’s market value.

“Apple earnings should handily beat December quarter expectations, but March guidance could moderately disappoint,” said UBS analysts.

The production cut was prompted by slower-than- expected sales in the holiday shopping season in Europe, the US, and China, the Japanese newspaper reported, without citing a source. For US and markets worldwide, a lot is riding on the success of tech companies, which report earnings in the coming days.

The sector accounts for more than a fifth of the S&P 500, meaning that stocks like Apple, Microsoft, and Amazon, which are the three largest holdings, could have a larger impact on markets as a whole. At Apple, all eyes will be on the iPhone and more specifically, how the more expensive iPhone X is faring.

IPhone X was the first phone to sport a new design since the launch of iPhone 6 in 2015 and many expected it to lead to blockbuster sales, dubbed by Wall Street analysts as “supercycle”.

“This was supposed to be the supercycle year and if Apple hasn’t been able to drive substantial unit growth this year, then that makes you little cautious on future iPhone cycles,” Atlantic Equities analyst James Cordwell said.

Several analysts have lowered their estimates for iPhone X shipments in the past few weeks, citing the high price of the device among other factors, with at least three downgrading their rating on the stock.

Adding to the concerns, Verizon Communications said last week its post-paid device activations were lower than last year as people were keeping phones longer.

A survey of people planning to buy the iPhone showed the percentage looking to buy the iPhone X has dropped to 37% from 43% in an earlier survey, UBS analysts wrote in a note published yesterday. The iPhone X, which features an edge- to-edge display and facial- recognition technology to unlock the phone, went on sale in November in the US.

Asian supply chain checks suggest that iPhone X orders have been weakening recently, with first-quarter production likely to be about 20 million units, JP Morgan analyst wrote in a note last week. Quite a few of Apple’s iPhone parts suppliers are based in Asia. Shares of Foxconn, one of Apple’s main suppliers and formally known as Hon Hai Precision Industry Co Ltd, fell 0.7% in yesterday’s session.

Canaccord Genuity analysts has lowered its second-quarter iPhone shipment estimates to 59.9m units from 66m units, citing its own survey.

“Our survey work indicates iPhone X sales were strong during the December quarter but sales appear slower in January, more in line with normal seasonal trends,” they wrote in a note.

Shares of US-listed Apple suppliers such as Micron Technology edged lower following the Nikkei report.

- Reuters and Bloomberg

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