iPhone XR production cuts suspected based on questionably weak demand, component quality i...

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in iPhone
Rosenblatt Securities' Jun Zhang has jumped on reports that Apple is allegedly reducing production of the iPhone XR within weeks of its release, warning of further production cuts and possible supply issues over the quality of printed circuit boards.

Blue iPhone XR
Blue iPhone XR


In his latest note to investors seen by AppleInsider, analyst Zhang writes the firm believes "the iPhone XR sell-through rate continues to be weaker than we initially expected." This weak demand may cause Apple to start "another round of iPhone XR production cuts" in the fourth calendar quarter.

"We believe Apple may reduce production for the iPhone XR by an additional 4-5 million units for C4Q," insists Zhang, while also suggesting production of the iPhone X will increase by 1 million to 2 million units due to carrier promotions for the holiday season.

Zhang's claim follows after a report on Monday said Apple was cancelling plans with Foxconn and Pegatron to expand manufacturing of the iPhone XR, with Foxconn using only 45 production lines despite preparing nearly 60 in anticipation of demand. The changes allegedly mean Foxconn will produce around 100,000 fewer units per day than originally planned.

Doubling down on the reduction claims, the note suggests "component pull-ins" are slowing this week. It is believed some PCB supplier shipments for HDI boards were "quickly dropped," which could be attributed to quality issues from supplier Skyworks.

"We believe this potential round of iPhone XR production cuts by Apple may be attributable to the recently found PA quality issues," the note advises.

Adding that it is "rare" for Apple to make dramatic production changes before the holiday season, Rosenblatt suspects component inventory levels are not as high as they normally would be at this time. The firm states it will continue to monitor iPhone holiday season sell-through rates to determine if the supposed production cuts are more due to quality issues or "if Apple is taking a more conservative approach to prepare for further softness in demand."

The new investor note is a continuation of Zhang's pessimism over Apple's latest smartphone launches. During the launch of the iPhone XS and iPhone XS Max, Zhang claimed the opening weekend sales for the iPhone XS were "weak" and predicting the overall sales of the two models to be lower than total iPhone X sales over a two-month period, despite claiming sales for the new models over the weekend were higher than the iPhone X equivalent.

In October, Zhang suggested the pre-orders for the iPhone XR outpaced the iPhone XS and XS Max, but still believed the initial sales of the model were weaker than expected after just one day of preorders. For the opening weekend, he highlighted "slowing demand" and "weak preorders," as well as the nine million units sold being a full million below his expectations, as being reasons to believe Apple would start reducing production of the iPhone XS and iPhone XR by a combined six million units by the end of 2018.

Rosenblatt downgraded Apple's stock from Buy to Neutral on Friday, which, along with a similar move by Bank of America Merrill Lynch, may have contributed to concerned investors offloading their shares. It also followed Apple's quarterly results which revealed 46.9 million iPhones were shipped in the three-month period, just 200,000 more than the same period last year, but still increasing iPhone revenue year-on-year from $28.8 billion to $37.2 billion.

Comments

  • Reply 1 of 12
    More unsubstantiated FUD. Fine by me if it lets me continue to buy AAPL at a discount.
    magman1979
  • Reply 2 of 12
    MplsPMplsP Posts: 701member
    In other news, Rosenblatt shorted Apple 3 days ago and is buying today...

    Whatever. People don't buy smartphones based on analysts stock valuations. They buy them based on what they want and what they need. 
    auxiomagman1979
  • Reply 3 of 12
    How accurate are these reports? Why does Apple seem to suffer from these production rumors or leaks while most other manufacturers don't? I actually do look on the internet for other Chinese smartphone companies having production slowdowns or quality issues with their products and usually I don't find anything. I occasionally find a few articles telling about Samsung production woes or quality issues but not every quarter. With Apple, one production rumor can start and be all over the internet, reaching even Youtube. What does questionably weak demand even mean? They're always talking about production not meeting expectations, but whose expectations. I suppose they're talking about Rosenblatt Securities' expectations but what are their expectations based upon. Apple's guidance? I'm not complaining about their expectations, but for some reason these articles don't have much solid substance. Apple's weaker guidance already implies the possibility of lowered sales numbers, so that should be sufficient enough.
    radarthekat
  • Reply 4 of 12
    Not surprised.
    Know what would have had demand through the roof? ; A 4.5" screen inside a case the size of an iPhone 5.
    freethinking
  • Reply 5 of 12
    backstab said:
    Not surprised.
    Know what would have had demand through the roof? ; A 4.5" screen inside a case the size of an iPhone 5.
    absolutely this, and let me use my wired headphones.  iPhone 5SE is the first apple device I actually paid for a replacement battery instead of replacing the device with new model, as none of the stuff fits my needs. I’m not alone. 
    atomic101
  • Reply 6 of 12
    Same here.  Although my battery replacement was a bit more "challenging" than it needed to be.

    I have an iPhone 7 for my work phone, and I leave it home any chance that I can.  It feels like a frying pan in my pocket compared to my SE.
    edited November 7
  • Reply 7 of 12
    jcs2305jcs2305 Posts: 522member
    atomic101 said:
    Same here.  Although my battery replacement was a bit more "challenging" than it needed to be.

    I have an iPhone 7 for my work phone, and I leave it home any chance that I can.  It feels like a frying pan in my pocket compared to my SE.
    The SE feels like a toy compared to the Plus or Max.. In my opinion.  Feels like a little ipod touch which I leave at home all the time. B)


    "It feels like a frying pan in my pocket compared to my SE"


    I often wonder how small of a person or how skinny the pants someone is wearing that comments like this are made?  I wear slim fit pants and I either have my Max in the front or back pocket and never feel like it's so huge that a frying pan is in my pocket. Fits just right..  Maybe you are a female ( I can't tell by the name ) so trying to fit a plus sized phone in the front or back pocket can def be a challenge.

  • Reply 8 of 12
    petripetri Posts: 58member
    I don’t understand why the XR is so big.  I could absolutely put up with the inferior screen and other cut backs for the price, but why does the only plausible successor to the SE on price have to be the size of a Plus?  And who is that needs/wants to carry a phone that size but wouldn’t stump up an XS/Max?

    I’m sure I’m missing something and Apple will have another blockbuster year etc, but for me there’s just nothing in the lineup now.
    coolfactorbackstab
  • Reply 9 of 12
    coolfactorcoolfactor Posts: 1,308member
    jcs2305 said:
    atomic101 said:
    Same here.  Although my battery replacement was a bit more "challenging" than it needed to be.

    I have an iPhone 7 for my work phone, and I leave it home any chance that I can.  It feels like a frying pan in my pocket compared to my SE.
    The SE feels like a toy compared to the Plus or Max.. In my opinion.  Feels like a little ipod touch which I leave at home all the time. B)

    "It feels like a frying pan in my pocket compared to my SE"

    I often wonder how small of a person or how skinny the pants someone is wearing that comments like this are made?  I wear slim fit pants and I either have my Max in the front or back pocket and never feel like it's so huge that a frying pan is in my pocket. Fits just right..  Maybe you are a female ( I can't tell by the name ) so trying to fit a plus sized phone in the front or back pocket can def be a challenge.


    I'm a small man, 5'4", and the SE is the perfect phone for me. I was hoping for an updated SE, but the XR has caught my eye, But the reports that it's "larger than expected" have me worried a bit. I don't want a big phone. My gf has had the 6s and now has the 7, and it's just a tad too big for me.
    edited November 7
  • Reply 10 of 12
    jcs2305 said:
    atomic101 said:
    Same here.  Although my battery replacement was a bit more "challenging" than it needed to be.

    I have an iPhone 7 for my work phone, and I leave it home any chance that I can.  It feels like a frying pan in my pocket compared to my SE.
    The SE feels like a toy compared to the Plus or Max.. In my opinion.  Feels like a little ipod touch which I leave at home all the time. B)


    "It feels like a frying pan in my pocket compared to my SE"


    I often wonder how small of a person or how skinny the pants someone is wearing that comments like this are made?  I wear slim fit pants and I either have my Max in the front or back pocket and never feel like it's so huge that a frying pan is in my pocket. Fits just right..  Maybe you are a female ( I can't tell by the name ) so trying to fit a plus sized phone in the front or back pocket can def be a challenge.

    Comedy delivered, but perhaps not completely received.  Of course I'm exaggerating a bit, but perception is what's important here, and it's merely an opinion.  Not sure how something feeling like a toy directly compares to the notion of something feeling heavy/large/cumbersome, but I guess its interesting to note that the first half of the iPhone's lifespan was comprised of phones SE sized or smaller - and they worked perfectly for most who owned them.  Perhaps the iPhone generation is getting older and their eyes are failing them.

    Also, consider the fact that I'm not necessarily referring to pant pockets.  At work, I keep my phones in the shoulder pockets of my uniform, and the larger size has caused a bit of unwanted adaptation.

    Regardless, opinions are what they are.  I was merely agreeing with the previous comments, and would certainly be excited to see a smaller form factor replacement for the SE.
    backstab
  • Reply 11 of 12
    1st this BS needs to be ignored.

    2nd, In the last 2yrs, I have gone from an SE to the X and just upgraded to the Max. The Max fits in my pocket just fine. After having been ‘one handed use’ proponent, I took the plunge to the X (100% for the dual camera) and instantly wished I used a Plus phone sooner. My iPad is collecting dust and I am literally doing everything on my Max. I really love the size.

    I get where the SE fans are coming from (been there) but not fitting in your pocket is not a concern. One handed use is the real compromise but damn is that big, beautiful screen and the dual camera worth the compromise.
  • Reply 12 of 12
    clarker99 said:
    1st this BS needs to be ignored.

    2nd, In the last 2yrs, I have gone from an SE to the X and just upgraded to the Max. The Max fits in my pocket just fine. After having been ‘one handed use’ proponent, I took the plunge to the X (100% for the dual camera) and instantly wished I used a Plus phone sooner. My iPad is collecting dust and I am literally doing everything on my Max. I really love the size.

    I get where the SE fans are coming from (been there) but not fitting in your pocket is not a concern. One handed use is the real compromise but damn is that big, beautiful screen and the dual camera worth the compromise.
    Yeah, your BS definitely does need to be ignored.
    Pocket fit is crucial, though not as crucial as one handed use.
    My phone goes in my back pocket and I still sit on my ass. There is currently only one iPhone model that can do that.
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