A WSJ report corroborates what we have been hearing from the last few weeks: Apple has asked its suppliers to cut production of the iPhone XS and iPhone XR.
Citing sources, the report says that with three new models, the company has struggled to accurately predict demand which has “created turmoil along its supply chain.” The demand for the new iPhones has also been lower than expected in China. Due to the low demand, Apple has asked its suppliers to tweak their production schedule thereby frustrating many.
Apple has reportedly reduced iPhone XR orders to its suppliers by a third, though the iPhone XS and iPhone XS Max have seen a lower reduction than that. Analyst Ming-Chi Kuo in one of his investor’s notes claimed that there is strong demand for the iPhone XS Max and iPhone XR so it is strange to see Apple cutting down production for the XR the most.
Lower-than-expected demand for Apple Inc.’s new iPhones and the company’s decision to offer more models have created turmoil along its supply chain and made it harder to predict the number of components and handsets it needs, people familiar with the situation say.
Despite the slowdown in iPhone sales, Apple is expected to post a higher iPhone ASP (Average Selling Price) than last year thanks to the launch of the iPhone XS Max. Plus, with Apple’s services business booming, the company does not need to worry about its bottom line being affected in any way. Apple suppliers, however, are in a different boat altogether as they are going to be affected negatively by this slowdown in iPhone sales and the volatility in the market and orders from Apple.
Apple for its part has said multiple times that one should not pay too much heed to its supply chain reports. Analysts had expectations of an iPhone upgrade supercycle last year with the iPhone X but that did not happen. This led many to term the device as a failure, though the iPhone X was the best selling smartphone in the market for months after its release.