Reports of a 'second wave' of iPhone production cuts are probably wrong

AppleInsider

Companies within the iPhone supply chain are apparently feeling the effects of Apple's alleged order cuts to varying degrees, as while some firms have revised their revenue estimates downwards, others like TSMC are said to avoid any major financial issues from the reductions.

iPhone XS, iPhone XS Max, and iPhone XR

Numerous supply chain reports and production estimates from analysts over the last month have claimed Apple is cutting down its production of iPhones to meet lower-than-expected demand. While the cuts ultimately reduce the workload and the amount of revenue Apple's suppliers can generate, the impact varies between companies.

But, a new report on Tuesday morning from supply chain monitor DigiTimes claims that there is a "second wave" of cuts that have just been ordered.

The order reductions have also apparently hit jobs, with flexible PCB supplier Career Technology said to have recently laid off 110 workers in order to cope with the cuts. An unidentified iPhone assembler has also taken steps to cut down its personnel cost and other expenses, by bringing its workforce reduction plans forward.

Meanwhile, power management tech supplier Dialog Semiconductor's CEO Jalal Bagherli claimed on November 14 that the company did not see the same hit to its bottom line as other suppliers, in part due to the technology being used in so many Apple devices.

Based on the timing of the reports, the suppliers are likely to be making their staffing and manufacturing estimate changes over the initial post-launch wave of cuts. The report also claims Apple has issued a second wave of order reductions, but considering the need for lead times for manufacturing, it is unlikely that any supply chain firms will be feeling any effects from it for the moment.

DigiTimes has claimed cuts beyond seasonal ones for the last four years running based on observed sales, perceived weakness, and supplier metrics including employment, and it doesn't appear that they were accurate with any of those predictions either. It also botched iPhone X demand predictions for over six months, with repeated claims that the device was selling well below expectations, and wasn't beating the iPhone 8 in the marketplace.

Apple's iPhone sales per quarter showing the same seasonal pattern every year

Apple A-series chip producer TSMC is effectively insulated from any Apple-ordered cuts, according to DigiTimes due to other clients queuing up to take advantage of the firm's 7-nanometer fabrication process. While shipments of A12 chips are expected to decrease quarter-to-quarter, TSMC has apparently received bookings from other clients for the process.

TSMC is already working on producing Kirin 980 chips for Huawei and is expecting to start volume production of the Qualcomm Snapdragon 8150 in the first quarter of 2019, sources claim. After that, AMD's Radeon Instinct M160 and M150 server accelerator chips are also set to be produced by the firm in 2019, with the AMD EPYC server processor also touted for production by TSMC.

Other firms tipped to use the TSMC 7-nanometer process include Broadcom, Xilinx, and Nvidia.

A company like TSMC with multiple major clients is certainly able to weather waning orders better than suppliers who have far fewer customers. In the case of lens supplier Largan Precision, which advised in October it expected shipments to decrease that month and in November, with revenues declining to match.

andrewj5790

I’ve tried many times to wade into other comments sections on other sites, and it’s like banging ones head against a brick wall. Prices too high... Apple is doomed... blah blah blah...

radarthekat

I’d like to see one so-called analyst give any kind of reasonable explanation why only a few Apple suppliers have reported these issues.  Where’s the other 200+ suppliers?  DED nailed it in his recent article where he went supplier-by-supplier through the subject.  

lkrupp

andrewj5790 said:

I’ve tried many times to wade into other comments sections on other sites, and it’s like banging ones head against a brick wall. Prices too high... Apple is doomed... blah blah blah...

Tech blogs have precisely NO influence on the public's or investor’s thinking. Tech blogs live in their own isolated universe cut off from the real world. Tech blogs have been trashing Apple for forty years now and have had no effect on the company’s fortunes. If tech blogs could influence the market Apple would have been gone twenty years ago, but they’re still here. I have yet to hear any comment from any friend or family member that some tech blog influenced their decision to buy or not to buy an Apple product. “Oh, I read an article on MacRumors that said Apple is doomed so I bought a Dell instead.” What I usually hear is, “The people on those sites are nut cases!”

tzeshan

radarthekat said:

I’d like to see one so-called analyst give any kind of reasonable explanation why only a few Apple suppliers have reported these issues.  Where’s the other 200+ suppliers?  DED nailed it in his recent article where he went supplier-by-supplier through the subject.  

The iPhone supply chain is a misleading name. It implicates that only Apple uses them. 

512ke

1) the dollar is really strong creating sales headwinds, 2) Apple was surely tipped off before the public that Trump is about to hit Apple products with tariffs in the USA, 3) global smartphone demand is on the decline, and 4) despite making progress with watches and services, Apple still relies heavily on the iPhone for the lion's share of its revenue.

Those and similar factors could prove that even a broken clock tells the correct time twice a day. Maybe all the years of gloomy thinking will come true for the naysayers, and Apple will become the value rather than growth stock they've been predicting incorrectly for a decade or more. 

domicinator

512ke said:

1) the dollar is really strong creating sales headwinds, 2) Apple was surely tipped off before the public that Trump is about to hit Apple products with tariffs in the USA, 3) global smartphone demand is on the decline, and 4) despite making progress with watches and services, Apple still relies heavily on the iPhone for the lion's share of its revenue.

Those and similar factors could prove that even a broken clock tells the correct time twice a day. Maybe all the years of gloomy thinking will come true for the naysayers, and Apple will become the value rather than growth stock they've been predicting incorrectly for a decade or more. 

This actually already sort of came true years ago. iPhone sales were never going to be able to grow forever, and they've been basically flat for the last several quarters. But that's now almost beside the point when it comes to tech blogs and Apple rumor sites jumping on these supply chain reports day after day and year after year--the narrative they're trying to convey is not "iPhone sales flat/decreasing" but rather "Nobody likes Apple anymore so nobody is buying iPhones." They all know full well this is not true and they don't care. FUD and clickbait sell. Measured, rational analysis doesn't. EDIT: This very comment section is case in point: 6 comments total. The typical Apple Doom article on Macrumors has 200 comments within an hour. Give it a weekend and it usually gets up toward 500-600. Negativity sells.

brisance

512ke said:

1) the dollar is really strong creating sales headwinds, 2) Apple was surely tipped off before the public that Trump is about to hit Apple products with tariffs in the USA, 3) global smartphone demand is on the decline, and 4) despite making progress with watches and services, Apple still relies heavily on the iPhone for the lion's share of its revenue.

Those and similar factors could prove that even a broken clock tells the correct time twice a day. Maybe all the years of gloomy thinking will come true for the naysayers, and Apple will become the value rather than growth stock they've been predicting incorrectly for a decade or more. 

1. Not the first time the dollar has been strengthening over Apple's history.
2. Would a person who could afford the latest Ferrari, Lamborghini etc be deterred by a price increase of 10%? No! Some might even welcome it, since it signals their supposed wealth/disposable income compared to plebs. Of course, the slippery slope argument says that we will reach a point where a price is too high for even the richest people. Applying that to Apple's situation: is $1000 too much for a smartphone? They introduced the iPhone X last year and, despite similar protestations from the financial and tech press, they turned in another solid year of profits. Now, ask yourself this question: would the public pay $300K for a Kia, or would it pay $300K for a Ferrari? There is your answer.
3. By this measure then Facebook and Google would have much lower valuations since they are one-trick ponies and have >90% of their revenue from advertising alone. Plus backlash from the global community for messing with their elections, disinformation etc.

bestkeptsecret

andrewj5790 said:

I’ve tried many times to wade into other comments sections on other sites, and it’s like banging ones head against a brick wall. Prices too high... Apple is doomed... blah blah blah...

I suggest you stick to the AI forums. Just put some of the regular jokers like avon_b7 and rogifan_new in your block list and you'll be fine.

GatoryGuy is an acquired taste...