Weak Demand Causes Apple to Slash iPhone X Production 50%

The stakes were (and continue to be) high for Apple’s high-end iPhone X. A barrage of reports have converged on the bittersweet reality that demand for its first thousand-dollar iPhone flagship may be growing tepid..

Those analyses were corroborated this morning in a fresh report from the well-connected Nikkei Asian Review, which most notably tells us of Apple’s latest decision to slash iPhone X production by a whopping 50 percent during the fiscal first quarter — cutting its targets from 40 million units in the to around 20 million.

Today’s news interestingly comes less than a week after it was reported that Apple plans to discontinue iPhone X entirely by the fall of this year.

The report goes on to cite “slower than expected sales” during the important holiday shopping quarter, which, in combination with Apple’s eleventh-hour attempts to truly ramp up iPhone X production, has merely resulted in inventories of the handset “swelling up.”

“The U.S. tech giant notified suppliers that it had decided to cut the first-quarter production target to around 20 million units, in light of slower-than-expected sales in the year-end holiday shopping season in key markets such as Europe, the U.S. and China,” Nikkei said in its report, adding that “The iPhone X […] has failed to catch on globally.”

Domino Effect

Not only will Apple’s decision to cut iPhone X production have an obvious impact on its earnings and sales outlook, but, according to this morning’s report, it may also “have a domino effect” on the company’s various supply chain partners, as well, which could even result in a massive liability for the tech giant.

“The production cuts for the X will have a domino effect on manufacturers that supply high-performance components for the handset,” Nikkei noted, adding that the impact is expected to run into “billions of dollars for the January-March quarter alone.”

Apple’s iPhone X circuit board manufacturer: Murata Manufacturing Co. who will reportedly begin “slowing down production” in response to the news after steadily churning out the flagship’s exclusive MetroCirc board since early January.

Additionally, the decision is expected to affect suppliers including Sony, Kyocera, and TDK, who provide Apple with advanced camera sensors, additional circuitry, and batteries for iPhone X.

Most importantly, however, Apple’s decision is likely to impact Samsung Display Co. — its [currently exclusive] OLED display supplier — with whom it was reported to have inked a major deal last year to provide it with 100 million+ OLED panels for the iPhone X.

Reason for Concern?

While Apple’s decision to cut iPhone X production so soon, and so substantially, is bound to cause concern among its investors, today’s news should hardly come as a surprise to those who’ve been following us. Numerous reports, including an earlier, Economic Daily News analysis, have for weeks been suggesting that iPhone X demand is growing lukewarm.

Apple has not offered comment on any of these reports — and though its stock (NASDAQ: AAPL) has shed about 4 percent of its value since they began swirling, it’s still highly unlikely we’ll hear anything about iPhone X performance until the company’s February 1st earnings call.