IPhone production cut
January 6, 2016
Apple shares lost 2.5 percent amid a general market upswing on Wall Street Tuesday, after the Japanese business daily Nikkei reported the company was expected to cut iPhone production by 30 percent.
As inventories of the iPhone 6s and 6s Plus had piled up at retailers in markets ranging from China and Japan to Europe and the United States, production would be scaled back to let dealers go through their current stock, Nikkei reported.
Apple's latest iPhones have been sold since last September, but customers see little improvements over previous models of the smartphone, while the rise in the US dollar has led to sharp price increases in emerging markets.
FBR Capital Markets analyst Daniel Ives told the news agency Reuters that the production cut was "eye-opening" which would speak to softer demand. "The Street was bracing for a cut but the magnitude here is a bit more worrisome," he added.
Asian parts makers hit
Shares in the mainly Asian makers of the iPhones' screens and chips were also sharply lower on Wednesday.
TSMC, the world's largest chipmaker, which has supplied some of the chips used in Apple iPhones, fell 1.8, while another Taiwanese assembler, Pegatron, ended 5.7 percent lower.
Among LCD panel makers, Japan Display fell 4.7 percent, while LG Display fell 3.4 percent. Other suppliers such as Japan's Murata Manufacturing, Alps Electric and TDK Corp dropped between 3 and 4 percent.
In recent weeks, Wall Street analysts have also tempered their views on the high-flying stock. Since early December, about a third of the analysts tracked by Thomson Reuters have trimmed their estimates on Apple.
For fiscal 2016, Apple is expected, on average, to grow revenue by under 4 percent, a far cry from the 28 percent revenue growth it achieved in the fiscal year that ended in September.
However, Patrick Moorhead, an analyst at Moor Insights & Strategy, said he was a bit skeptical about the negative outlook for Apple.
"Apple has been gaining significant market share in pretty much every region, and I'm not seeing a global slowdown," Moorhead told Reuters.
According to Nikkei, the production cut will last only for the first quarter of 2016, and production is expected to return to normal in the April-June period.
uhe/tko (Reuters, AFP, Nikkei)