Analyst Expects More iPhone Production Cuts With iPhone XR Hit Hardest

Apple continues to claim that the iPhone is selling well despite reports to the contrary. Reports have been particularly critical of sales numbers for the iPhone XR, something that Apple refuted last month when it claimed that the iPhone XR was its best selling model. Apple has also been hit with iPhone sales bans by Qualcomm recently in Germany and China. Now, analyst Jun Zhang from Rosenblatt has issued an investor note predicting that Apple will cut iPhone production.

iPhone XR

According to Zhang, production could be cut by another 4 million units during the March quarter of 2019. Zhang writes that Apple is facing challenges, particularly in China, relating to the arrest of Huawei CFO Meng Wanzhou. Wanzhou faces up to 30-years in prison for fraud and for violating U.S. sanctions in Iran. Zhang wrote that multiple Chinese firms supported Huawei by subsidizing employees who purchased Huawei devices rather than iPhones. The concern is that the Huawei debacle could further up the resentment towards Apple, an American company, and the sale of iPhones in China.

Zhang predicts that Apple will chop iPhone XR production by 2.5 million units, production of iPhone XS is predicted to decline by 1 million units, and the iPhone XS Max is expected to see a reduction of 500,000 units. The reduction in iPhone production has reportedly been felt throughout the Apple supplier ecosystem. Many of the firms providing components and assembly services have reduced expectations due to the reduced production by Apple. Apple is certainly feeling the pinch with the reports of sluggish iPhone sales. Its market capitalization is reportedly $744 billion, putting it well below Microsoft's market cap of $779 billion. Apple's market cap is down significantly from its $1 trillion high back in August 2018.