Apple falls 2% on iPhone production cut report

The report comes after another claiming that Apple is cutting iPhone production by 30%.

Apple is expected to cut around 30 per cent orders of the iPhone 6s and iPhone 6s Plus to its suppliers in the first quarter of 2016, reports Japanese business newspaper Nikkei. Normally in cases like this it means that the product has reached its end of life. Feng notes that Lightning headphones will be the wired alternative option, but Apple “expects” most people to move to wireless particularly if Apple starts bundling wireless EarPods with the iPhone 7 as suggested.

Shares in supply companies, including Asian screen manufacturers, also fell since the report was published, the Guardian reported. This, according to analysts, could be an indication of the saturating iPhone market.

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”. What’s more, the provincial government is giving the company formally known as Hon Hai more than $12 million in subsidies to limit any layoffs.

The market is reacting to the news with pessimism, and it has been affecting Apple’s stock in world markets and on Wall Street.

In October, Apple head Tim Cook said that the company expected iPhone sales to increase in the first quarter of this fiscal year, which ended in December, compared to the same period a year earlier.

Even Foxconn, a key Apple supplier, appears to have been affected and some workers at its Zhengzhou factory in China were sent on early holiday in December, ahead of the usual new-year holiday season in February, WSJ said, citing a person involved in the supply.

With regard to slowing Chinese smartphone market, the analyst commented that the market is slowing to flat year-over-year (YoY) growth in calendar year 2016 (CY16), which will impact the iPhone sales.

“The slowing down of the market is the truth”, one Taiwanese supplier said, requesting anonymity because they did not comment on specific clients or confidential agreements.

A staff member stands beneath Apple’s logo at an apple store in Beijing, November 2, 2015.

If there are other reasons behind the production cut, they’re not likely to indicate any decline in the luster of Apple’s product line, according to Patrick Moorhead, founder of the tech advisory firm Moor Insights & Strategy.

Once the inventory adjustment is complete, production should return to normal in June quarter, Nikkei said.