Apple To Cut iPhone X Output Apple Slices Plans for iPhone X -- WSJ
January 31 2018 - 3:02AM
Dow Jones News
By Yoko Kubota in Beijing and Tripp Mickle in San Francisco
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 31, 2018).
Apple Inc. is slashing planned production of the iPhone X for
the three-month period ending March 31, people familiar with the
matter say, in a sign of weaker-than-expected demand for the pricey
handset.
Apple plans to make about 20 million iPhone X handsets in the
first quarter, down from roughly 40 million initially planned,
according to a person with knowledge of Apple's production goals.
Other people familiar with the iPhone supply chain said Apple had
cut orders for components used in the iPhone X by 60%.
Apple declined to comment. The company will offer its first
report on iPhone X sales Thursday when it reports earnings for the
three months ended in December. Analysts expect the company to
report total iPhone shipments -- including sales of iPhone 6, 7 and
8 series models -- rose 1.5% during the period, according to
FactSet Research.
Investors have been betting that the iPhone X would drive a
resurgence in Apple's smartphone sales this year, and that its
lofty price -- it starts at $1,000, about 50% more than previous
models -- would give a further boost to revenue. The iPhone X
production cuts for the March period have raised investors' concern
that sales could fall short and that average selling prices for the
iPhone, a much watched metric, could also lag behind
expectations.
Apple's stock fell 2.1% Monday after the production cutback was
reported by Japan's Nikkei newspaper, and a further 0.6% Tuesday.
The shares are off 5.7% since Jan. 22.
Launched a decade after Apple's first iPhone, the iPhone X was
promoted as the smartphone of the future, with features including a
sharp, organic light-emitting diode display and facial-recognition
technology. Apple set the price high in hopes of boosting revenue
and preserving margins on a device that features more expensive
components. But troubles incorporating the new technology led to
delays in the manufacturing process and forced Apple to abandon the
use of fingerprints as an option to unlock the phones.
Those early delays were exacerbated by a shortage of certain
components used in the facial-recognition system. Sales of the
iPhone X didn't begin until Nov. 3, much later than usual for
Apple's new models, shortening the critical retailing window ahead
of the holiday shopping season.
Some consumers have said they don't believe the features justify
the iPhone X's high price. "People love Apple, but they still have
limitations," said Kylie Huang, a Taiwan-based analyst at Daiwa
Capital Markets covering the Apple supply chain.
Further complicating things, Apple for the first time last year
released three new devices, meaning the iPhone X competed for sales
with the iPhone 8 and iPhone 8 Plus. Those two devices, which start
at $699, are pricier than predecessors but offer a less-costly
alternative to the iPhone X.
Instead of the iPhone X or iPhone 8, though, some customers have
turned to older, less-expensive models such as the iPhone 7 and 7
Plus, said Canalys analyst Nicole Peng. She said that wasn't
necessarily a bad thing for Apple, noting that the older models are
cheaper to produce and generate relatively high margins per unit.
"Apple doesn't need to rely on one model to perform very well to be
able to achieve the financial results they are aiming at," Ms. Peng
said.
Not all suppliers face the same level of order cuts because of
different manufacturing demands for components. Murata
Manufacturing Co., a Japanese iPhone X component supplier,
suggested its reduction wasn't as severe as some others. "The
figure sounds a little bit bigger," a Murata representative quoted
Vice Chairman Yoshitaka Fujita as saying on Tuesday, when asked
about the Nikkei report. "But we know that there are talks of
cuts."
Analysts have already started lowering their iPhone shipment
expectations for the current quarter, pointing to weaker business
results from crucial Apple suppliers. Still, sales of the pricier
iPhone X, iPhone 8 and 8 Plus are expected to lift the average
iPhone selling price and boost revenue from the same period a year
earlier.
Sanford C. Bernstein & Co. analyst Toni Sacconaghi this week
cut estimated iPhone shipments in the March quarter to 53 million
units, down 20% from 66 million a year earlier, but raised the
average selling price to $767, up 17%.
Write to Yoko Kubota at yoko.kubota@wsj.com and Tripp Mickle at
Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
January 31, 2018 02:47 ET (07:47 GMT)
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