Apple expected to cut iPhone 6S, 6S Plus production

Nikkei report suggests that production cut will happen due to rising stock

Apple is expected to cut production of its latest iPhone models by about 30 per cent in the January-March quarter due to rising stock, the Nikkei reported, rattling the nerves of investors in the US giant's Asian suppliers.

As inventories of the iPhone 6s and 6s Plus have piled up since they were launched last September, production will be scaled back to let dealers go through their current stock, the business daily reported.

The report prompted a 2.5 per cent drop in Apple shares, which have lost about a quarter of their value from record highs in April, reflecting worries over slowing shipments. Shares in the mainly Asian makers of the iPhones’ screens and chips were also sharply lower on Wednesday.

"This is an eye-opening production cut which speaks to the softer demand that Apple has seen with 6s out of the gates," FBR Capital Markets analyst Daniel Ives said. "The Street was bracing for a cut but the magnitude here is a bit more worrisome."


Among LCD panel makers, Japan Display fell 4.7 per cent while LG Display fell 3.4 per cent.

Hon Hai Precision Industry was down 1.8 per cent to trade around T$77.80, lows not seen in over four months. Hon Hai, which goes by the trade name of Foxconn, is a major assembler of Apple’s iPhones.

TSMC, the world's largest chipmaker and which has supplied some of the chips used in Apple iPhones, was off about 1.1 per cent to T$136.50, levels not seen since mid-November. Another Taiwanese assembler, Pegatron , was off about 4 per cent to trade around T$69.00, lows not seen in a year.

Other suppliers such as Japan's Murata Manufacturing, Alps Electric and TDK fell by 3 or 4 per cent.

Production is expected to return to normal in the April-June quarter, the Nikkei reported.

However, Patrick Moorhead, an analyst at Moor Insights & Strategy, said he was a bit skeptical about the production cut reports.

“Apple has been gaining significant market share in pretty much every region, and I’m not seeing a global slowdown,” Mr Moorhead said.

Apple was not immediately available for comment.

The parts suppliers cited in the Nikkei report were not available for comment outside their regular business hours.

Tepid forecast by Apple suppliers such as Jabil Circuit, which manufactures casings for iPhones, and Dialog Semiconductor in December stoked fears that iPhone shipments could fall for the first time.

Wall Street has also tempered its view on the high-flying stock in recent months. 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 per cent, a far cry from the 28 per cent revenue growth it achieved in the fiscal year that ended in September.