Supply chain needlessly predicting doom and gloom for 2018 iPhone early

Posted:
in iPhone edited June 8
Apple has allegedly warned its supply chain partners to expect orders for components used to produce iPhones in this fall's refresh to drop by around 20 percent, a report claims, with the overall suggestion that Apple is becoming less ambitious regarding sales of the new models later this year.




New orders for iPhone parts from Apple are "quite conservative," a supply chain source advised Nikkei Asian Review. "For the three new models specifically, the total planned capacity could be up to 20 percent fewer than last year's orders," the unnamed source told the report.

For the iPhone X, iPhone 8, and iPhone 8 Plus, Apple allegedly prepared for up to 100 million units to be produced. Two supply chain sources said similar orders for this year's new models indicate the total number of shipments will be closer to 80 million units.

The three iPhone models currently speculated to arrive this fall include two models with OLED screens measuring 6.5 inches and 5.8 inches, while a third is equipped with a 6.1-inch TFT LCD. Nikkei claims all three will have the TrueDepth camera array and use Face ID, but the LCD model will be singled out as a cost-effective model while the OLED versions will have more premium pricing and specifications.

Two report sources claim that, in order to avoid any manufacturing delays that allegedly occurred during the initial production of the iPhone X, suppliers were informed by Apple to prepare for the two OLED models earlier than normal. Increased preparation ahead of production could fend off component shortages and quality control issues that were said to have caused last year's manufacturing problems.

"The scheduled time frame for components for the OLED models to go into iPhone assemblers like Foxconn and Pegatron for final assembly falls in July, while the schedule for components for the LCD model would be in August," one source states. "Two OLED models are likely to be ready roughly one month earlier than the cost-effective LCD model, according to the current plan."

It is currently expected that all three of this fall's iPhones will start shipping in September, rather than being released at a later time.

There is some speculation that the LCD model will be delayed, due to production yield issues surrounding its touchscreen functionality, but the situation is apparently improving. Bottlenecks in integrating the TrueDepth camera array into the LCD screen are also said to be easing, removing another hurdle that could cause manufacturing delays.




Suppliers are currently undergoing an Apple verification process ahead of mass production, one source claimed, with assembly partners Foxconn, Pegatron, and Wistron also communicating with Apple over scheduling. Finalizing the schedule will apparently influence how each assembly partner recruits its workforce.

Foxconn will continue to be the main iPhone assembler this year, with it said to handle all 5.8-inch OLED units and 80 to 90 percent of the 6.5-inch OLED version, as well as 30 percent of LCD model orders. Pegatron is identified as taking 60 percent of the LCD orders and between 10 and 15 percent of the 6.5-inch OLED model orders, while Wistron makes up the remainder.

Reports stemming from unidentified supply chain sources are not always completely truthful, and can be fabricated from hearsay and speculation without any concrete evidence. While the report's details do seem to correlate with earlier reports, there is still no proof that can confirm the reduced order claims are genuine.

Apple CEO Tim Cook has previously spoken out about such reporting and supply chain analysis, advising for industry observers to avoid relying too heavily on these types of rumors. "The supply chain is very complex, and we obviously have multiple sources for things," Cook advised in 2013, adding that some reports could be based on a "single data point," and basing assumptions on limited quantities of data is not recommended.

For example, reports in January claimed Apple had cut its iPhone X production, citing slower-than-expected holiday sales" among other claims. On February 1, Apple revealed it had continued to improve its holiday quarter revenue year-on-year, and though overall iPhone sales had dropped, it had reduced by only 1.2 percent year-on-year while simultaneously achieving the highest average selling price of $796.42.
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Comments

  • Reply 1 of 38
    melgrossmelgross Posts: 30,368member
    All year long we’ve been hearing this from Nikki. It’s normal from them to talk Apple down. Rarely, they’re right, but it seems to be more due to chance than to any real quality investigative reporting.
    radarthekatDeadguy2322magman1979StrangeDayswatto_cobraAlex1Njony0
  • Reply 2 of 38
    asdasdasdasd Posts: 5,040member
    This report is clearly showing that Apple over estimated last year, and is setting expectations this year. Which is what you would expect. 

    In short nothing to see here regarding a fall in demand this year. 

    We don't know if they will keep the old X around, if they do I expect it to be a big seller. 
  • Reply 3 of 38
    SOP for a good number of those who speak out of their rear end every few weeks.
    So far the guidance given by Apple has been pretty accurate. I guess they are hoping that this time Tim Cook is wrong.
    Time will tell but in the meantime, the 'collective of shorters on Wall St will make hay'

    The only way to stop this is to do the same as Dell did and go private. Then the 'shorters' will simply find another target to go after big time.
    One day perhaps?
    Deadguy2322watto_cobra
  • Reply 4 of 38
    sfolaxsfolax Posts: 21member
    I thought this was a DED article when I saw the title.

    Anyways is just another tactic for stock prices of those companies to dip, people to buy in and then come the iPhone announcement it shoots up.
    Deadguy2322watto_cobra
  • Reply 5 of 38
    tmaytmay Posts: 2,648member
    SOP for a good number of those who speak out of their rear end every few weeks.
    So far the guidance given by Apple has been pretty accurate. I guess they are hoping that this time Tim Cook is wrong.
    Time will tell but in the meantime, the 'collective of shorters on Wall St will make hay'

    The only way to stop this is to do the same as Dell did and go private. Then the 'shorters' will simply find another target to go after big time.
    One day perhaps?
    I suspect that the rumor has more to do with the eventual mix of new products than a weakening in expected demand, but either way, Apple and Warren Buffett are going to find some nice deals on buybacks and stock respectively.
    radarthekatDeadguy2322watto_cobra
  • Reply 6 of 38
    LucioguidoLucioguido Posts: 9unconfirmed, member
    asdasd said:
    This report is clearly showing that Apple over estimated last year, and is setting expectations this year. Which is what you would expect. 

    In short nothing to see here regarding a fall in demand this year. 

    We don't know if they will keep the old X around, if they do I expect it to be a big seller. 
    How do we know anything from this report, let alone the what you’re trying to decipher. Do we know how many companies Apple is sourcing components from? Do we know what models will be available next year?

    Apple set their expectations for the fall and winter quarters and just barely beat both expectations. Sounds to me like they absolutely nailed their expectations last year. This source predicted winter sales would fall dramatically short, they were extremely wrong. 

    Apple will set its guidance for this years iPhone at the end of the summer quarter. Until then, who knows what to expect. Certainly not these guys, since they have been very wrong already this year with this same data point. 


    radarthekatDeadguy2322
  • Reply 7 of 38
    GG1GG1 Posts: 167member
    There may be some truth to these less-than-expected orders.

    Consider the impact of the (popular) battery replacement program; consider that iOS12 will speed up all phones a bit more; then you have a recipe for a less compelling reason to upgrade.

    This is my situation. However, we don't know the 2018 line-up yet. But a dual-SIM iPhone will be a very compelling new feature for me.
  • Reply 8 of 38
    Embrace the DOOM! It's time for more share buybacks.
  • Reply 9 of 38
    nunzynunzy Posts: 320member
    I smell a SuperCycle! Whatever the analysts say, the opposites always happen!
  • Reply 10 of 38
    lkrupplkrupp Posts: 5,997member
    As for me I'll take Apple's guidance any day over some supply chain wonk. Apple is legally bound by SEC rules when giving guidance. Supply chain rumors are not.
    edited June 8 jmey267Deadguy2322watto_cobra
  • Reply 11 of 38
    lkrupplkrupp Posts: 5,997member
    SOP for a good number of those who speak out of their rear end every few weeks.
    So far the guidance given by Apple has been pretty accurate. I guess they are hoping that this time Tim Cook is wrong.
    Time will tell but in the meantime, the 'collective of shorters on Wall St will make hay'

    The only way to stop this is to do the same as Dell did and go private. Then the 'shorters' will simply find another target to go after big time.
    One day perhaps?
    At its current valuation it would be impossible for Apple to take itself private.
    muthuk_vanalingamwatto_cobra
  • Reply 12 of 38
    tmay said:
    I suspect that the rumor has more to do with the eventual mix of new products than a weakening in expected demand, but either way, Apple and Warren Buffett are going to find some nice deals on buybacks and stock respectively.
    Here we go again.  I had hoped that Ming Chi Kuo getting fired by KGI Securities would put a stop to this madness.  Apparently not.

    It is the norm (average of last 6 years) that iPhone unit sales decline 20.20% from FQ2 (March quarter) levels to FQ3 (June quarter) level (20.95% since iPhone 6 launch).

    There is nothing happening here except that, despite the historical decline from FQ2, iPhone unit sales during FQ3 are going to increase 6.15% YoY.

    Articles like this happen when the idiot writing the story has no finance training/knowledge or chooses (for the headline) to ignore it.  My guess is that he/she is just stupid.
    Deadguy2322
  • Reply 13 of 38
    This keeps happening... Analysts release doom and gloom predictions based on "supply chain insider sources," the stock dips a little, Apple releases amazing results, the stock climbs. The SEC might want to investigate the stock purchasing behavior of these so-called analysts and their friends. I'm not so sure it's just incompetence that pushes them to come up with this BS.
    edited June 8 rob53jmey267Deadguy2322Alex1N
  • Reply 14 of 38
    radarthekatradarthekat Posts: 2,373moderator
    GG1 said:
    There may be some truth to these less-than-expected orders.

    Consider the impact of the (popular) battery replacement program; consider that iOS12 will speed up all phones a bit more; then you have a recipe for a less compelling reason to upgrade.

    This is my situation. However, we don't know the 2018 line-up yet. But a dual-SIM iPhone will be a very compelling new feature for me.
    Counter point to that is that with fewer trade-ins those looking in the pre-owned market will find less supply.  They may be pushed to buy one of the previous year’s flagships, which here in the Philippines can still mean an iPhone 6/6+ or 6S/6S+.  And the option to buy a new former flagship becomes more attractive given iOS 12’s performance boost on older models.  Apple won’t suffer for making the iPhone experience better.  If anything, it’s reputation will be bolstered, attracting even more people to iPhones in general. 
    Deadguy2322watto_cobraAlex1N
  • Reply 15 of 38
    rob53rob53 Posts: 1,867member
    This keeps happening... Analysts release doom and gloom predictions based on "supply chain insider sources," the stock dips a little, Apple releases amazing results, the stock climbs. The SEC might want to investigate the stock purchasing behavior of these so-called analysts and their friends. I'm not so sure it's just incompetence that pushes them to come up with this BS.
    My bet is the SEC is part of the illegal activity. Nobody except Cook (and a few others who keep their mouth shut) knows who every Apple supplier is. Everyone else is guessing yet the Market listens to all the manipulators and bounces around like a basketball. Remember who gets paid no matter which way the market goes—the brokers. 
    Deadguy2322Alex1N
  • Reply 16 of 38
    who knows what to expect. Certainly not these guys, since they have been very wrong already this year with this same data point. 


    A very smart man once told me that if you can't measure something, you can't manage it.

    I've been tracking many aspects of Apple's business since 2005.  One of the elements I track is unit sales by quarter and that quarter's sales in relation to the year.  Each year's results are pretty consistent as to relationship to full-year results.

    Since iPhone 6 launch December quarter generates ~34.48% of full-year unit sales.
    March quarter generates 24.72% of full-year unit sales
    June quarter generates ~19.54% of full-year unit sales and,
    September quarter generates ~21.25% of full-year unit sales.

    These averages fall within 1.5% of actual results and have done so since FY2015.  You are correct Nikkei doesn't know what to expect, BECAUSE THEY ARE FICTION WRITERS NOT FINANCIAL ANALYSTS.  On the other hand, if you do track (measure) the right things you can know what to expect with pretty strong confidence.
    jmey267muthuk_vanalingamDeadguy2322radarthekatAlex1N
  • Reply 17 of 38
    jmey267jmey267 Posts: 34member
    Really another supply chain story? I thought these analysts moved onto the "services wont perform as well story". Unreal
    edited June 8 Deadguy2322
  • Reply 17 of 38
    racerhomie3racerhomie3 Posts: 528member
    I will take Apple word over Nikkei's & WSJ's .
    Alex1N
  • Reply 19 of 38
    avon b7avon b7 Posts: 2,206member
    Q2 unit sales were lower than Q1.
    Q3 unit sales will be lower than Q2.
    Q4 unit sales usually buck the trend a little
    Q1 unit sales are the annual peak.

    You don't need an analyst for that.

    You don't need an analyst to tell you that annual shipments have been flat for years now.

    You don't need an analyst to tell you that Apple is preparing for 'post iPhone'.

    If you bought into Apple over the last two years you would have done so knowing full well that the iPhone was unlikely to be blazing a trail in the same way it did in the previous years and therefore would already be taking into account a possible slip in unit sales.

    If you bought into Apple years ago you have probably already made your gains and if you haven't already reduced your stake, you also see a 'post iPhone' Apple.

    In both cases, this supply chain rumour is irrelevant to you.

    Of course, if Q4 18 unit sales don't buck the downward trend of the previous two quarters, you'd better have your tin foil hat ready because the share price will enter the perfect storm no matter what the supply chain rumours claim and independently of how healthy Apple's other business areas may be.

    And if Q1 19 unit sales don't correct that theoretical dip, expect Tim Cook to start shining his own tin foil hat (and wear it during the earnings call) and dusting off the RDF.

    All this without an analyst or supply chain rumour in sight.

    Q3 will be a breeze though as nothing is expected of it anyway.




    ...


    muthuk_vanalingam
  • Reply 20 of 38
    rogifan_newrogifan_new Posts: 2,832member
    It’s really sad that investors continue to react every time one of these stories comes out. At what point do they just ignore the noise rather than overreacting to it?
    muthuk_vanalingamDeadguy2322jmey267Alex1N
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