Apple is gearing up to cut production of its iPhone by roughly 10 percent in the new year.
According to a report by the Nikkei Asian Review, the production cut will happen in the first quarter and comes on the heels of Apple cutting production from January to March 2016 because of a buildup of the iPhone 6s. While that move in the beginning of last year prompted Apple to rein in production of the iPhone 7, sales aren’t doing as well as expected and thus the further production cuts. The report noted the production cuts are for both the iPhone 7 and the iPhone 7 Plus. The iPhone 7 Plus is still popular, but a shortage of sensors for its camera has prompted Apple to scale back because it can’t meet demand.
While Apple is reportedly cutting production, the report noted that, in Japan, demand for the iPhone 7 and the iPhone 7 Plus remains strong, largely driven by the phone’s ability to accept and make contactless payments via an IC chip reader. Still, while that’s good news, Japan only accounts for 10 percent of all of Apple’s global sales and isn’t going to be enough to make up for sluggish demand elsewhere. It’s not only Apple who is poised to suffer from the lackluster demand. Component makers will also feel some pain, but that will be cushioned by orders from Chinese smartphone markers and demand for in-car technology. A source told Nikkei Asian Review the production cuts are “within expectations.”
Apple’s iPhone 7 may not be doing that well, but that hasn’t stopped Credit Suisse from being bullish about the eventual launch of the iPhone 8. In a recent research report, analyst Kulbinder Garcha said he is “looking forward to the iPhone 8 super cycle,” as that phone debuts, ostensibly, next year. And even as other analysts see concerns over Apple’s success in sourcing enough components to satisfy production demands, Garcha stated that there could different product strategies: 1) two iPhones, both OLED; 2) three iPhones, one OLED; or 3) three iPhones, all OLED.