Another January, another misleading iPhone supply cuts story from Nikkei

Posted:
in iPhone edited January 29
Everyone in the industry should know that "channel checks" of Apple suppliers offer largely worthless data. But every January, Japan's Nikkei newspaper unloads a report suggesting that Apple is scrambling to slash production of its newest iPhone because of disappointing sales. Every year that report has been false, and every year the tech media falls for it.




This year, Nikkei has claimed Apple is slashing production orders for iPhone X due to "slower than expected holiday sales" the U.S., China, and Europe. The report comes right after CIRP noted that iPhone X outsold iPhone 8 Plus, and that both larger models outsold the standard sized iPhone 8. iPhone X by itself outsold the now very attractively-priced iPhone 7, as well as the combined sales of all iPhone 6s, 6s Plus and SE models--despite being on sale for five fewer weeks than all of those other models.

Yet Nikkei reported that it thinks Apple's production targets for previous models is unchanged, while iPhone X production is supposedly being slashed in half. This is being reported after months of stories that suggested Apple couldn't build enough iPhone X components.

Additionally, the Nikkei report, credited only to "staff writers," claimed that Apple's production slashing was down "from the figure of over 40 million units envisaged at the time of its release in November."

Apple has previously sold 50-60 million iPhones in total in its January quarter. Imagine launching three new flagship iPhones at the highest prices ever asked, while also introducing the widest array of new, cheaper options, and then "envisaging" that the vast majority of customers would all buy just one of those models: the most expensive iPhone X.

That's simply insulting to Nikkei readers, and it explains why such an important sounding "insider report" wasn't attached to the reputation of any specific writer. The article actual claimed that iPhone X "has failed to catch on globally," and then, in a sort of desperate attempt to boldly state the most preposterous horseshit possible, stated "iPhone X features facial recognition and wireless charging, but unlike previous models, is widely regarded as lacking any groundbreaking new technology."

The report ended noting that "Apple did not comment on production plans for the iPhone X in response to The Nikkei's inquiry," knowing full well that Apple does not ever comment on specific production rumors, and that it could freely run with anything in the piece, even the notion that iPhone X has nothing really new in it.

At the same time, Apple suppliers including Austrian component maker AMS AG, which makes optical sensors to adjust brightness and color and support facial recognition--a feature component unique to iPhone X--just raised its revenue outlook on rising demand for its sensors in phones, according to a new report by Thyagaraju Adinarayan for Reuters.

"The increase," the report noted, "will likely allay concerns that weak iPhone X orders are likely to persist through the first half of 2018."

At odds with the assertions of the unsourced, unclaimed story published by Nikkei, there is no consensus among analysts that iPhone X sales are underperforming or disappointing.

Q4 results for Apple are strong, especially iPhone (and lesser extent iPad). iPhone X hit numbers at the high end of the industry range.

-- Ryan Reith (@ryanreith)

This all happened before: iPhone 7

If the story sounds familiar, it's because Nikkei reported similar woes for iPhone 7 a year ago. It claimed Apple was cutting orders by ten percent due to "sluggish sales." Yet there was nothing sluggish about iPhone 7 sales, and actual shipments didn't fall by anywhere near ten percent. During the quarter that Nikkei reported sluggish sales, iPhone shipments grew by 4.7 percent, reaching a new highest ever peak in sales.

The following quarter, facing strong competition from Samsung's Galaxy S7, iPhone sales remained steady year-over-year, with less than one percent change in sales. And across the rest of 2017, iPhone sales continued to remain above their year-ago quarters. If Apple did indeed cut any orders by 10 percent, it had no apparent effect on actual sales.

This all happened before: iPhone 6s

The previous year, Nikkei reported that Apple had cut supplier orders for iPhone 6s models by "30 percent," based on channel checks at unnamed "Japanese and South Korean parts suppliers."

The paper did note that "output will be scaled back to let dealers go through their current stock. Production is expected to return to normal in the April-June quarter, once inventory adjustment is complete. Apple's products and brand have not lost their appeal, and older models have continued to sell."

That indicates that the authors knew that rumored supply cuts have no real relevance on overall iPhone demand or unit sales for the last quarter or the coming quarter, and instead only pertain to internal inventory adjustments. At the time, Apple analyst Ben Bajarin noted on Twitter "My data and checks confirm the same."

Piper Jaffray analyst Gene Munster similarly characterized the channel check rumors as production estimates that would have little to do with final reported sales.

Channel check interpretations in a changing product mix

Interpreting the meaning of changes in Apple's vast supply chain would require an in-depth understanding of the company's inventory management, its production ramp and how early production began compared to the previous year.

This year was Apple's first-ever production of three different sizes of new flagship iPhones, and the largest spread in iPhone pricing ever, from the most expensive iPhone X to the least expensive model ever offered: iPhone SE.I would suggest it's good to question the accuracy of any kind of rumor about build plans. And I'd also stress that even if a particular data point were factual, it would be impossible to accurately interpret the data point as to what it meant for our overall business - Tim Cook

This year, Apple is also selling the largest array of different generations of new pairs of flagships, meaning that the company is again learning how many of its customers will opt for the latest and greatest 8/8 Plus/X models, the newly discounted 7/7 Plus, or the least expensive 6s/6s Plus/SE models.

Apple never comments on Nikkei rumors, but Apple's chief executive Tim Cook has previously addressed supply chain rumors in general, starting in January 2013 when he noted, in an earnings call transcript by MacWorld, "I know there's been lots of rumors about order cuts and so forth, and so let me just take a moment to make a comment on these.

"I don't want to comment on any particular rumor, because I would spend my life doing that, but I would suggest it's good to question the accuracy of any kind of rumor about build plans.

"And I'd also stress that even if a particular data point were factual, it would be impossible to accurately interpret the data point as to what it meant for our overall business, because the supply chain is very complex, and we obviously have multiple sources for things. Yields might vary, supplier performance can vary, the beginning inventory positions can vary, I mean there's just an inordinately long list of things that would make any single data point not a great proxy for what's going on."

This all happened before, again and again, since 2013

Cook made those comments five years ago in January 2013 because of reports issued just prior to Apple's earnings release which claimed that the company had slashed its display orders "in half."

That report came from the same Nikkei paper that is now claiming Apple's iPhone X supplier orders may be cut by "50 percent." The Wall Street Journal also followed up with its own version of the channel check story in 2013, centering its attention on iPhone 5c. However, that paper first backpedaled its story, and ultimately was proven wrong as iPhone 5c turned out to be not only popular but strategically important in inciting Android switchers and a major smartphone success story.

As Cook noted, even if there had been any element of truth to Apple's reported internal supplier changes, it had no impact on the number of iPhones Apple actually sold back in 2013. Apple reported sales of 47.8 million iPhones in the holiday quarter, representing a 29 percent increase over the previous year.

The following quarter, Apple reported sales of 37.4 million iPhones in its historically slower post-holiday March quarter. There was no indication of any supply cut, and no possible way Apple could have been hoping to sell twice as many iPhones in the March quarter, as the Nikkei report implied.

Report everything, some of it might be true

Just as in other years, the original Nikkei rumor in 2013 also included an alternative explanation of the rumored supply chain cuts, that time from analyst JoAnne Feeney of Longbow Research.

"Our checks with supply chain contacts close to the situation identified a very different cause: a slower ramp in the manufacturing of iPhones and iPads (reflecting some quality control issues) and insufficient production lines," Feeney was cited as saying.

"Rather than ordering more components and having inventory build up further, Apple put component suppliers on notice to hold off, for the time being, on further shipments until it expanded its production lines - which it plans to complete by the end of the quarter."

Nikkei, along with the Wall Street Journal, chose to instead focus on the potential of weak demand for iPhones being behind the supply chain inventory adjustments. As Cook later noted, interpretations of the meaning of rumored supply chain changes have regularly been wildly inaccurate.

After the past couple of years, people really ought to have learned that supply chain production volume rumours for iPhones are worthless

-- Benedict Evans (@BenedictEvans)


Previous supply channel check rumors were wrong in 2012, independent supply channel checks from other sources (including Piper Jaffray analyst Gene Munster and Jefferies' Peter Misek) were wrong in 2013, and over the following quarter a series of supply channel check rumors (including regular reports issued by Credit Suisse analyst Kulbinder Garcha) also failed to result in any real insight on how many iPhones Apple will actually report, at the time or in future quarters.

Channel check rumors have, however, resulted in driving Apple's stock price down dramatically, just as they did in 2013 when the Nikkei and the Wall Street Journal reported them. And the best time to seek to manipulate Apple's stock price is right before earnings, which this year will be released later this week.
fotoformatbb-15macseekerbwintxgregg thurmanmagman1979RonnnieOlolliver
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Comments

  • Reply 1 of 33
    macxpressmacxpress Posts: 4,639member
    So why doesn't the media just ignore this report and stop giving them attention? 

    To me, Apple is cutting production because the holiday buying season is over so it doesn't make any sense to keep producing the same amount iPhones of any model. I would think this would be commonsense....I guess not. So I would think this would happen every January or around that timeframe. This should be nothing new. 
    edited January 29 Solimuthuk_vanalingamAirunJaebb-15racerhomie3ronngregg thurman
  • Reply 2 of 33
    Daniel, it seems that you and Roger may want to get on the same page. 


    adaptabilityrandominternetpersondtb200
  • Reply 3 of 33
    thrangthrang Posts: 745member
    macxpress said:
    So why doesn't the media just ignore this report and stop giving them attention? 
    Because they are bereft of any real reporting and news...they just sit back and regurgitates what others present to them, with the typical pro/con debate of experts, on 24-hour channels on cable. No one actually does work anymore it seems, at least in business journaljism. And ANYTHING about Apple, especially impending doom, is enormous click bait. I wish there was an investigation into manipulations such as this (stock sold when higher, unsubstantiated news story drives it lower, last week's sellers become buyers again). THERE'S your collusion story...
    bb-15ronnglynhmagman1979gregg thurmanRonnnieOlostkiwilollivernetmage
  • Reply 4 of 33
    robjnrobjn Posts: 200member
    These negative reports have pushed the stock down about 5% over that past week.

    The analysts behind these reports give their ‘insights’ to their subscribers before they give it to the media. The subscribers can see the report is negative and sell stock before the market responds to the media reports. Then they can buy the stock back at a cheaper price ahead of Apple’s earnings report. When Apple give their report the contrived fears will likely be eased and the stock price might recover. If their game comes off as they plan, these market manipulators might come away with 5-10% profit.

    Rather than being played, the media should expose the apparent manipulation. Instead they unwittingly facilitate it.
    muthuk_vanalingambb-15ronnglynhmacseekerbwintxjax44gregg thurmanlostkiwinetmage
  • Reply 5 of 33
    Rayz2016Rayz2016 Posts: 4,461member
    Daniel, it seems that you and Roger may want to get on the same page. 


    Different pages, twice the clicks. 
  • Reply 6 of 33
    Rayz2016Rayz2016 Posts: 4,461member

    robjn said:
    These negative reports have pushed the stock down about 5% over that past week.

    The analysts behind these reports give their ‘insights’ to their subscribers before they give it to the media. The subscribers can see the report is negative and sell stock before the market responds to the media reports. Then they can buy the stock back at a cheaper price ahead of Apple’s earnings report. When Apple give their report the contrived fears will likely be eased and the stock price might recover. If their game comes off as they plan, these market manipulators might come away with 5-10% profit.

    Rather than being played, the media should expose the apparent manipulation. Instead they unwittingly facilitate it.
    Reinforce the lie, twice the clicks. 
    ronngregg thurman
  • Reply 7 of 33
    Stock is down almost 2% this morning. Obviously Wall Street believes these rumors because they want to. Because they’ve been convinced since 2011 (and certainly since iPhone 6) that iPhone has hit its peak and there’s no more innovation left and no customers to be had outside of the low end. And they go looking for rumors that will confirm their priors. The Financial Times claims Apple is going to report a record holiday quarter with $19B in profits. Yet if Apple guidance for the March quarter that is flat YOY or even slightly down the stock will tank after hours. Ridiculous.
    edited January 29 bb-15ronnmelodyof1974gregg thurman
  • Reply 8 of 33
    gatorguygatorguy Posts: 19,414member
    Negociarlaw – Thank you for pointing out the conflicting articles from Daniel and Roger. Perhaps reporters from AppleInsider don’t collaborate or check in with anyone before posting. In my eyes, these contradicting stories tarnish their reputation and make me considerably less likely to click on their headlines in the future.
    Daniel posts opinion pieces and opinions vary. Simple enough. 
    ronnjony0netmage
  • Reply 9 of 33
    ksecksec Posts: 1,515member
    Well if one actually read into the numbers, what Nikki is actually saying Apple has sold 40M unit in this Q, and they are only going to sell 20M unit next Q.

    i.e Half of Apple's Q1 target, 80M unit, half of them will be iPhone X. If Apple actually do that then it is a very good number. 

    But then if you only read the word "Slashed in half" and "Disappointing" you might think otherwise.
    gregg thurman
  • Reply 10 of 33
    maestro64maestro64 Posts: 4,338member
    macxpress said:
    So why doesn't the media just ignore this report and stop giving them attention? 

    To me, Apple is cutting production because the holiday buying season is over so it doesn't make any sense to keep producing the same amount iPhones of any model. I would think this would be commonsense....I guess not. So I would think this would happen every January or around that timeframe. This should be nothing new. 

    This is exactly what is going on, Q1 does not look like Q4, never has and never will. I personally think this is cultural thing. In Asia I have read they do not have concept of past and future they live in the present. So production is being cut as compared to yesterday, this mean sales are less tomorrow. They are not comparing to last year at the same time the just comparing it to right now.

    Then you have Wall street who shots first and ask questions later. You would hope they would know the difference, they might but they just use the confusion to their advantage.

  • Reply 10 of 33
    Rayz2016 said:
    Daniel, it seems that you and Roger may want to get on the same page. 


    Different pages, twice the clicks. 
    This organization (AI) is not like that. These folks have integrity. 

    That is why I come here and not to the click-bait of the other sites.

    Peace. 
    ronndtb200baconstanglolliver
  • Reply 12 of 33
    NY1822NY1822 Posts: 545member
    Algorithms doing a lot of trading these days...they search for headlines and key words to trigger an action
    gregg thurman
  • Reply 13 of 33
    macxpress said:
    So why doesn't the media just ignore this report and stop giving them attention? 

    To me, Apple is cutting production because the holiday buying season is over so it doesn't make any sense to keep producing the same amount iPhones of any model. I would think this would be commonsense....I guess not. So I would think this would happen every January or around that timeframe. This should be nothing new. 
    Wall Street knows the March quarter is never going to compare to the December quarter. This latest rumor claims Apple is slashing its production order for its target for the current quarter not what was sold in the December quarter. This rumor comes out every year. There is no way to verify it and then people move on to something else and it’s as if these rumors never existed so no one pays a price for them.
    muthuk_vanalingam
  • Reply 14 of 33
    maestro64 said:
     I personally think this is cultural thing. In Asia I have read they do not have concept of past and future they live in the present. 
    I expect you're overgeneralizing.  I've met some people from Asia and they seem to understand the concept of time just fine.
  • Reply 15 of 33
    Big investors want to believe the news and that's all there is to it.  I'm sure they'd rather put their money into companies that are guaranteed to gain in value no matter what.  Any of the FANG stocks are proving to be much better investments than Apple.  Same with Microsoft, NVidia and Boeing.  The CEOs of those companies apparently are much smarter than Tim Cook is.  Tim Cook is doing absolutely nothing to stop Apple from being the most volatile major tech stock on the street.  A stock like Tesla, despite the company burning through cash, can make better share gains than Apple because Elon Musk knows how to manipulate investors into believing Tesla can't possibly fail.  Meanwhile, Tim Cook who is sitting on about $200B in repatriated cash, can't convince big investors that Apple is as solid as a rock.

    Apple's near total dependency on iPhone sales alone has become a thorn in the side for Apple shareholders.  When possibly fake news and unsubstantiated rumors can cause Apple stock to take a downward spiral, then there is definitely something wrong with Apple's leadership.  Apple, with the lowest P/E of any major tech company, always proves to be the first stock to take the biggest drop and the slowest to regain lost share value.  What makes the FANG companies so much smarter than Apple when it comes to gaining share value?  Since the beginning of the year, the whole tech market has been soaring except for Apple.  WTF is that all about.

    Screw it.  I'm getting my Apple dividends every quarter even if the share price goes into the toilet.  I just hope Apple increases those dividends to a greater degree every year.  However, I'm willing to bet Apple is going to throw more money away on buybacks which isn't doing anything for share value but at least allows the dividend money to go further as shares are eliminated.  I'm not going to concern myself about this wasted holiday quarter because there's nothing I can do about it.  Whatever happens, happens.  I hope Tim Cook tells the truth and doesn't say how wonderful Apple is doing when all indications say otherwise.  Even a decent holiday quarter might only get Apple back to where it was before the doom and gloom stories flooded the internet.  It really sucks.  Alphabet is ready to overtake Apple in market cap yet again thanks to a nice, fat P/E.

    Yeah, Happy New Year!  Apple is starting 2018 with a huge thud.  It's just totally uncalled for considering how much cash Apple has to toss around.
    rogifan_newJanNL
  • Reply 16 of 33
    JanNLJanNL Posts: 249member
    Apple, with the lowest P/E of any major tech company, always proves to be the first stock to take the biggest drop and the slowest to regain lost share value.

    However, I'm willing to bet Apple is going to throw more money away on buybacks which isn't doing anything for share value but at least allows the dividend money to go further as shares are eliminated.
    Aren't buybacks correlated with P/E?
  • Reply 17 of 33
    Big investors want to believe the news and that's all there is to it.  I'm sure they'd rather put their money into companies that are guaranteed to gain in value no matter what.  Any of the FANG stocks are proving to be much better investments than Apple.  Same with Microsoft, NVidia and Boeing.  The CEOs of those companies apparently are much smarter than Tim Cook is.

    I don't tink it's that, just that smaller companies would appear to have more room to grow.


      Tim Cook is doing absolutely nothing to stop Apple from being the most volatile major tech stock on the street.  A stock like Tesla, despite the company burning through cash, can make better share gains than Apple because Elon Musk knows how to manipulate investors into believing Tesla can't possibly fail.  Meanwhile, Tim Cook who is sitting on about $200B in repatriated cash, can't convince big investors that Apple is as solid as a rock.

    Apple's near total dependency on iPhone sales alone has become a thorn in the side for Apple shareholders.  When possibly fake news and unsubstantiated rumors can cause Apple stock to take a downward spiral, then there is definitely something wrong with Apple's leadership.  Apple, with the lowest P/E of any major tech company, always proves to be the first stock to take the biggest drop and the slowest to regain lost share value.  What makes the FANG companies so much smarter than Apple when it comes to gaining share value?  Since the beginning of the year, the whole tech market has been soaring except for Apple.  WTF is that all about.

    Screw it.  I'm getting my Apple dividends every quarter even if the share price goes into the toilet.  I just hope Apple increases those dividends to a greater degree every year.  However, I'm willing to bet Apple is going to throw more money away on buybacks which isn't doing anything for share value but at least allows the dividend money to go further as shares are eliminated.  I'm not going to concern myself about this wasted holiday quarter because there's nothing I can do about it.  Whatever happens, happens.  I hope Tim Cook tells the truth and doesn't say how wonderful Apple is doing when all indications say otherwise.  Even a decent holiday quarter might only get Apple back to where it was before the doom and gloom stories flooded the internet.  It really sucks.  Alphabet is ready to overtake Apple in market cap yet again thanks to a nice, fat P/E.

    Yeah, Happy New Year!  Apple is starting 2018 with a huge thud.  It's just totally uncalled for considering how much cash Apple has to toss around.
    Smaller companies would appear to have more room to grow.  When you've already dominated a market, one wonders where additional profits will come from.  Already for a long time, people have wondered when the "law of big numbers" would catch up to Apple.  Apple can't possibly double from here, and then it does.  The world hasn't yet seen a trillion dollar company, so I'd guess we're not just about to see a $2 trillion company.  I think the shares of some other companies are more likely to double than Apple in the shorter term.  I've been wrong before and could be wrong again.  it's not about other CEOs being smarter, it's about the companies being smaller and the expected revenue streams being sufficiently large or at least nebulously defined that people can imagine anything such as huge growth.  Apple sells phones, computers, etc.  Easy enough to understand where most of the money is coming from until they enter some other lucrative market.  What's Apple's next move?  Cars? Car electronics?  Something else entirely different?

    I disagree with buybacks being a waste of money.  They do contribute to shareholder value.  It's evident enough in the effect of buybacks on P/E.  Apple has a low P/E as you observed, and some people think it should be higher.  Share buybacks will support a higher share price for the same P/E and higher dividends.  


    randominternetperson
  • Reply 18 of 33
    I thought it might be appropriate to mention this:

    One way businesses manage inventory against uncertain demand is to require their suppliers accept adjustable POs (within mutually agreed-upon parameters). So Apple could have placed a PO for UP TO 40 million phones and simply revised it as agreed. This aligns inventory with demand very quickly.
    Note that these types of agreements do not actually cancel the products ordered on early POs. Inventoried parts and manufacturing time are simply moved to later in the year. It's not rocket science...

    -Mike
    radarthekatJFC_PA
  • Reply 19 of 33
    I've been reading that the plethora of misinformed "credible" sources for the story about Apple "cutting" and "discontinuing" the iPhone X stem from a story on Appleinsider. Now I see your story "Another January, another misleading iPhone supply cuts story from Nikkei" This one, however, doesn't lend itself to the bloodbath that the Market wants in order to buy Apple low prior to their Q1 18 report. Insider trading………another hallmark of the "No-regulations tRump administration" to put more money in the hands of the wealthy. I fall into that category and have a TON of Apple stock, so I have everything to gain and nothing to lose, yet this TRULY "Fake News" makes me nauseous! Honesty has little value in this morally deteriorating country (a euphemism for sh!thole nation).
  • Reply 20 of 33
    Big investors want to believe the news and that's all there is to it.  I'm sure they'd rather put their money into companies that are guaranteed to gain in value no matter what.  Any of the FANG stocks are proving to be much better investments than Apple.  Same with Microsoft, NVidia and Boeing.  The CEOs of those companies apparently are much smarter than Tim Cook is.  Tim Cook is doing absolutely nothing to stop Apple from being the most volatile major tech stock on the street.  A stock like Tesla, despite the company burning through cash, can make better share gains than Apple because Elon Musk knows how to manipulate investors into believing Tesla can't possibly fail.  Meanwhile, Tim Cook who is sitting on about $200B in repatriated cash, can't convince big investors that Apple is as solid as a rock.

    Apple's near total dependency on iPhone sales alone has become a thorn in the side for Apple shareholders.  When possibly fake news and unsubstantiated rumors can cause Apple stock to take a downward spiral, then there is definitely something wrong with Apple's leadership.  Apple, with the lowest P/E of any major tech company, always proves to be the first stock to take the biggest drop and the slowest to regain lost share value.  What makes the FANG companies so much smarter than Apple when it comes to gaining share value?  Since the beginning of the year, the whole tech market has been soaring except for Apple.  WTF is that all about.

    Screw it.  I'm getting my Apple dividends every quarter even if the share price goes into the toilet.  I just hope Apple increases those dividends to a greater degree every year.  However, I'm willing to bet Apple is going to throw more money away on buybacks which isn't doing anything for share value but at least allows the dividend money to go further as shares are eliminated.  I'm not going to concern myself about this wasted holiday quarter because there's nothing I can do about it.  Whatever happens, happens.  I hope Tim Cook tells the truth and doesn't say how wonderful Apple is doing when all indications say otherwise.  Even a decent holiday quarter might only get Apple back to where it was before the doom and gloom stories flooded the internet.  It really sucks.  Alphabet is ready to overtake Apple in market cap yet again thanks to a nice, fat P/E.

    Yeah, Happy New Year!  Apple is starting 2018 with a huge thud.  It's just totally uncalled for considering how much cash Apple has to toss around.
    Yeah what you're describing is managing to the stock price. It's like if NFL coaches managed for their fantasy league numbers and not winning the game at hand. This is also known as The Dumbest Idea in the World:

    The Dumbest Idea In The World: Maximizing Shareholder Value - Forbes

    ...the title was coined by a previous CEO of GE I believe. As detailed in the article, Apple takes a different approach -- delighting the customer, trusting that value will be generated if you do this well enough.

    If you're expecting Apple to manage itself for the stock price instead of for building great products, then they're not a good investment for you.
    randominternetpersonjax44radarthekatlolliver
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