Due to a decreased demand for iPhone 14 models, as well as supply chain issues with manufacturers, Apple has reduced its expected manufacturing output of iPhone 14 and 14 plus models. This reduction in sales is largely due to a decrease in spending by consumers, based on economic conditions at the moment, with inflationary pressure and a potential recession looming over their heads. Despite this decrease in demand for the standard iPhone models, the iPhone Pro and Pro Max models have very steady earnings. More in this article from Bloomberg. – Ross Sinclair
Apple Trims New iPhone Output by 3 Million Units as Demand Cools
By Debby Wu and Takashi Mochizuki
(Bloomberg) – Apple Inc. expects to produce at least 3 million fewer iPhone 14 handsets than originally anticipated this year, according to people familiar with its plans.
The company and its suppliers now aim to make 87 million devices or fewer, compared with a target of 90 million units earlier, the people said, asking not to be named discussing private information. The reduction is primarily due to softer demand for the iPhone 14 and 14 Plus models, cheaper alternatives to the high-end Pro offerings.
That comes in addition to supply problems in places like Zhengzhou, which is home to the main iPhone assembly site and is under a weeklong Covid-19 lockdown. Apple’s shares slid 1.5% to $136.3 as trading got underway in New York.
Sales of the iPhone 14 and Plus have rapidly cooled since their launch and the slowdown is deepening in China, according to a Jefferies analysis of the world’s biggest smartphone market. Apple previously cancelled plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize, Bloomberg News has reported.
Still, Apple said on Sunday that demand for its iPhone 14 Pro and Pro Max devices remains strong, though production of those handsets will be clipped by the lockdown in Zhengzhou. It declined to provide specific figures.
SMBC Nikko analysts led by Ryosuke Katsura on Friday lowered their overall forecast for Apple’s 2022 output to 85 million new iPhones from 91 million units. Their revised forecast actually raises expected production of iPhone Pro models, but cuts the standard editions by a bigger margin.
“Some firms have begun to factor in the potential impact of these changes in their earnings outlooks,” Katsura and colleagues wrote. They revised their outlook after “confirmation this week of production and sales corrections in China and emerging signs of production cutbacks at some materials makers.”
Apple declined to comment beyond a statement earlier about supply from Zhengzhou.
Apple Falls After Cut to IPhone Shipment Outlook: Street Wrap
The Zhengzhou facility, operated by Foxconn Technology Group and also known as iPhone City, is Apple’s main production hub for assembling Pro editions of its iPhones. It’s been the site of worker dissatisfaction and an exodus over the way Foxconn managed a coronavirus outbreak at the plant. The Taiwanese assembler has raised wages and put additional measures in place to improve worker welfare, which Apple has said is its top priority.
The Chinese government’s lockdown of Zhengzhou, effective for a week until Nov. 9, followed and now Foxconn says it’s working closely with the government to stamp out the pandemic and minimize the disruption.
Hon Hai Precision Industry Co., Foxconn’s main listed unit, has traded relatively flat over the past week while Apple’s shares are on a five-day losing streak amid wider skepticism about the prospects for tech and consumer businesses.
Apple’s bigger problem in the coming weeks may be the slump in iPhone demand rather than supply. China’s rigid Covid Zero policy has led to sudden lockdowns across the country, stymieing economic activity. Daily Covid-19 cases just hit a six-month high, leading officials to declare that the nation will stick to its strict virus controls.
(Updates with shares third paragraph)
–With assistance from Mark Gurman