Apple Production Cuts Reportedly Affect All 2018 iPhone Models Amid Soft Demand
Might it be possible that consumers are starting to suffer from iPhone fatigue? Well, anything is possible, as Kevin Garnett excitedly proclaimed after helping the Boston Celtics take home its 17th NBA championship, only Apple is far less likely to be as enthusiastic about an apparent slowdown in iPhone sales.
It was reported two weeks ago that Apple had cut back on iPhone XR orders amid tepid demand. According to that report, Apple told three separate iPhone XR suppliers to either reduce expectations for orders, or to eliminate manufacturing lines for the device. In addition, Apple reportedly told Foxconn and Pegatron, its two main suppliers, to halt plans for any additional iPhone XR production lines.
Now two weeks later, The Wall Street Journal is reporting that Apple's decision to create more iPhone models combined with sales falling short of expectations has "created turmoil among its supply chain." Apple's suppliers are apparently struggling to figure out how many handsets they need to produce, and what volume they should be cranking out components.
As if things were not murky enough, Apple is said to have slashed production orders for all of its 2018 iPhone models, including the iPhone XS and iPhone XS Max. WSJ also claims that Apple last week told several suppliers to cut production of the iPhone XR even further than before.
News of softening iPhone sales has investors feeling skittish, as evidenced by Apple's stock price—shares of Apple are down more than 3.6 percent so far today.
It's also worth noting that Apple recently decided to stop breaking down unit sales for iPhone devices and other hardware. That revelation came with the company's most recent earnings report earlier this month, and the subsequent drop in share price seemed to indicate that some investors were concerned with Apple's lack of transparency going forward.
Despite the uncertainty, Apple is coming off another record quarter in which it raked in $62.9 billion in revenue.
"We concluded a record year with our best September quarter ever, growing double digits in every geographic segment. We set September quarter revenue records for iPhone and Wearables and all-time quarterly records for Services and Mac," Apple CFO Luca Maestri said in early November. "We generated $19.5 billion in operating cash flow and returned over $23 billion to shareholders in dividends and share repurchases in the September quarter, bringing total capital returned in fiscal 2018 to almost $90 billion."
That said, if reports about Apple cutting its iPhone production are true, the company will have some tough decisions to make. One thing Apple might consider is pricing. The newest iPhone models start at $749 to $1,000, up from $649 to $769 two years ago.