LDN - Business

Apple to make 20 percent fewer new model iPhones this year: Nikkei

[June 09, 2018] By Vibhuti Sharma

(Reuters) - Apple Inc <AAPL.O> expects to ship 80 million new model iPhones this year, down 20 percent from what it had planned at the same time last year, Japanese financial daily Nikkei reported on Friday, citing industry sources.

The California-based firm has asked suppliers to make about 20 percent fewer components for the three new iPhones it plans to launch in the second half of 2018, compared to last year's plans for its iPhone X and iPhone 8 models, the paper reported.

The report added to concerns that consumer passion for new editions of the iconic smartphones may be cooling after years of scorching growth, sending shares in Apple and many of its major suppliers lower and weighing on global stock markets.

"This news needs to be viewed in the context of Apple probably being overly optimistic last year in relation to the prospects for its new phones, leaving it with excess inventory in the first part of this year," Atlantic Equities analyst James Cordwell said.

"At least part of this lower order forecast probably relates to Apple just being a little more realistic."

Apple did not immediately respond to a request for comment.

The company sold 217 million iPhones, including its older models, in the fiscal year ended Sept. 30. It does not break down the figures by model and is still manufacturing large numbers of earlier versions of the phone.

Factset and Thomson Reuters do not provide estimates for new model iPhone sales.

Some analysts said they already expected Apple to sell fewer phones this year than last as global demand for phones tightens and competitors eat into its sales. The company sold 129.5 million iPhones in the past two quarters, little changed from the same period a year earlier.

Apple's shares fell as much as 2 percent on the report, while those in suppliers AMS <AMS.S> and Dialog Semi <DLGS.DE> sank 6 percent and 4.1 percent, respectively. Dialog's shares had slumped 17 percent last Friday after it said Apple would cut orders for its power-management chips by around 30 percent this year.

U.S.-based supplier Advanced Micro Devices <AMD.O>, Micron Technology <MU.O> Intel <INTC.O>, Broadcom Inc <AVGO.O> and Qualcomm Inc <QCOM.O> were all down between 1 percent and 4 percent.

Many analysts have said the high price of the iPhone X - which sells for $1,000 and is the first iPhone to sport a new design since the launch of the iPhone 6 in 2015 - is also muting demand for the flagship.

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A customer stands underneath an illuminated Apple logo as he looks out the window of the Apple store located in central Sydney, Australia, May 28, 2018. REUTERS/David Gray/File Photo

"Apple is quite conservative in terms of placing new orders for upcoming iPhones this year," said one of four industry sources cited by the Nikkei Asian Review.

"For the three new models specifically, the total planned capacity could be up to 20 percent fewer than last year's orders."

Top Apple analyst Ming-Chi Kuo said earlier this week that Apple might cut prices of new iPhones to debut later this year by as much as $300, according to several media reports.

Kuo said that Apple was likely to launch a 6.5-inch OLED "IPhone X Plus," a second generation of iPhone X and an iPhone with a 6.1 inch screen.

"As the improvements made to the iPhone each year become increasingly marginal it may become more difficult to convince consumers to pay up for the latest model, when an older generation device is effectively just as good," said Atlantic Equities' Cordwell.

While media speculation about demand for the iPhone X swirled in the past six months, Apple's market value has continued to rise and is now within striking distance of $1 trillion.

D.A. Davidson & Co analyst Thomas Forte also played down any fears.

"I am not overly concerned ... about the lower supply speculations," he said. "Apple is doing enough in general to keep the ball moving forward."

The iPhone is by far the biggest revenue generating product from Apple. However, in an attempt to offset the impact of a weakening smartphone market, the company has been focusing on services as a path to growth.

The unit, which includes Apple Music, the App Store and iCloud, posted $9.1 billion in revenue in the second quarter. For the fiscal year 2017, iPhones contributed 62 percent to the company's total revenue, while services accounted for 13 pct.

(Additional reporting by Supantha Mukherjee and Laharee Chatterjee in Bengaluru; Editing by Saumyadeb Chakrabarty and Patrick Graham)

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