Apple's iPhone order 'cuts' causing supplier turmoil, despite forecast warnings

Posted:
in iPhone edited November 2018
Apple's suppliers are said to be struggling from allegedly weaker demand for new iPhones, a report claims, with Apple accused of having trouble determining interest in the market, despite demonstrating the opposite in its quarterly results forecast.

The iPhone XR range
The iPhone XR range


Recent reports of Apple's suppliers indicate that the company has reduced its orders for iPhone components, adjusting down the amount required to keep up with current demand. The reduced orders have led to suppliers warning of weaker than expected results for their financial results, which has led to some analysts and investors determining the latest iPhones aren't as popular as they could have been.

According to the Wall Street Journal, the choice to offer more models and lower-than-expected demand for the 2018 refresh has "created turmoil" in the supply chain. Sources claim Apple's actions have made it harder to predict the component order levels the company requires for the amount of iPhone XS, XS Max and XR units it wishes to produce.

Apple's decision to cut production orders for all three models is said to be frustrating to executives at suppliers, as well as its workers. Further notifications from the last week from Apple to suppliers that it has cut its iPhone XR orders again is also said to be making the situation worse for those involved.

Forecasts for the iPhone XR are said to be especially problematic according to the report, with Apple slashing production plans in late October by up to a third of the original 70 million units ordered between September and February. What is less clear is how the "cuts" compare to normal seasonal reductions in production, as they do not appear to be impacting Apple's entire array of suppliers.

Apple's decision to stop providing unit sales figures is also said to be a problem, as it will make forecasting seasonal sales much harder to predict.

Production changes are certainly not a new phenomenon, especially in the case of the iPhone. Reports over the years have offered similar observations that Apple orders confidently at first, before cutting orders later on.

"Doing business with Apple is very risky as it often reverses what it has promised," one supplier executive suggests.

The claim that Apple is struggling to predict demand may be suggested in the report, but its most recent quarterly results advise otherwise. In the results, Apple forecast an unusually wide revenue range of between $89 billion and $93 billion, twice as wide as usual, potentially indicating some level of uncertainty for unit sales in the period.

There has also been a warning from CEO Tim Cook to anticipate a softer forecast than analysts would usually expect, partly caused through the relatively late introduction of the iPhone XR and foreign exchange rate issues.

Cook has also previously suggested that relying on supply chain metrics to predict iPhone demand is folly. "I've never seen one that's even close to accurate," the executive said in 2015 regarding supply chain estimates, with variations on the same theme since.

Comments

  • Reply 1 of 15
    This article is missing a few keys points, 

    -  The author (Tripp Mickle) rarely gets things right regarding Apple.  His last major “expose”  predicted the company had a major inventory issue which proved to be totally wrong.  He is an Apple lightweight 

    -  Any production cuts are very likely already baked into the guidance Apple gave a couple of weeks ago 

    -  The WSJ gives zero details on any XS cut.  Just a blanket “orders reduced”.    Orders are reduced and adjusted all the time 

    -  This same exact story has surfaced at the same exact time in each of the last four years

    It seems like WSJ got 2-3 supplies to go negative on Apple and wrapped it with other info which was published by others last week 
    d_2equality72521racerhomie3radarthekatkruegdudejony0
  • Reply 2 of 15
    lkrupplkrupp Posts: 7,312member
    Rumors vs Guidance, who to believe. Rumors suffer no consequences if proven wrong. Official guidance, on the other hand, is a legal matter. If Apple knowingly gave false guidance then that’s outright fraud and somebody might go to jail along with huge fines, lawsuits, a fatal blow to credibility, a PR disaster. So who to believe? Let me think about that for a moment.
    jony0
  • Reply 3 of 15
    red oak said:
    This article is missing a few keys points, 

    -  The author (Tripp Mickle) rarely gets things right regarding Apple.  His last major “expose”  predicted the company had a major inventory issue which proved to be totally wrong.  He is an Apple lightweight 

    -  Any production cuts are very likely already baked into the guidance Apple gave a couple of weeks ago 

    -  The WSJ gives zero details on any XS cut.  Just a blanket “orders reduced”.    Orders are reduced and adjusted all the time 

    -  This same exact story has surfaced at the same exact time in each of the last four years

    It seems like WSJ got 2-3 supplies to go negative on Apple and wrapped it with other info which was published by others last week 
    WSJ did something similar with he 5S. It was front page news that Apple had cut orders by 60% because of weak demand. Of course it never turned out to be true but the stock took a beating because of it. And I see this morning the stock is down 2% pre market. Since 2013 Wall Street has been predicting iPhone DOOM. They’ll never stop believing it’s coming and that’s why they panic every time one of these supply chain rumor stories drop, even if they’re rarely ever right.
    radarthekatjony0
  • Reply 4 of 15
    Mike WuertheleMike Wuerthele Posts: 4,880administrator
    red oak said:
    This article is missing a few keys points, 

    -  The author (Tripp Mickle) rarely gets things right regarding Apple.  His last major “expose”  predicted the company had a major inventory issue which proved to be totally wrong.  He is an Apple lightweight 

    -  Any production cuts are very likely already baked into the guidance Apple gave a couple of weeks ago 

    -  The WSJ gives zero details on any XS cut.  Just a blanket “orders reduced”.    Orders are reduced and adjusted all the time 

    -  This same exact story has surfaced at the same exact time in each of the last four years

    It seems like WSJ got 2-3 supplies to go negative on Apple and wrapped it with other info which was published by others last week 
    Points two through four are indeed addressed.
  • Reply 5 of 15
    So Analysts are spreading FAKE news all over again and they can get away w it, for the meantime the Company stocks tumble and they buy Apple stocks....
    This is pure manipulative....there should be laws against this
  • Reply 6 of 15
    BebeBebe Posts: 123member
    True or False?  We’ll find out when Apple announces earnings in Jan 2019. 
    radarthekat
  • Reply 7 of 15
    zoetmbzoetmb Posts: 2,483member
    Bebe said:
    True or False?  We’ll find out when Apple announces earnings in Jan 2019. 
    Yes, and when it turns out to be false, the stock still won't rise because the idiot analysts will say (as they've said before) that "well Apple made it this quarter, but they won't make it next quarter" and they'll be wrong again.

    Apple's fiscal 2018 completed with record revenues and earnings in every single quarter.  iPhone unit sales were up 0.4% although iPad sales were down 0.5% and Mac sales were down 5.4%.    But Services were up 24% and "Other" was up 35.4%.    The analysts still haven't gotten the message that Apple is no longer just a hardware company.   If Apple spun off Services, Services would be a Fortune 500 company all by itself and most analysts ignore it completely.

    Furthermore, Apple's net income was larger in 2018 than its net revenue up through 2009.    What other company can say that?  Revenue and earnings have more than doubled since Jobs left the company.   

    I can see why Apple doesn't want to report unit sales anymore, but I think they should continue to do so anyway.   Hiding such data isn't going to make them look better.  
    jasenj1
  • Reply 8 of 15
    The Wall Street Journal has predicted 12 of the last two Apple sales misses.
    wizardddd4RonnnieOlkrupp
  • Reply 9 of 15
    dewmedewme Posts: 2,158member
    There is certainly a high level of schizophrenia in the market when it comes to Apple. On the other hand, Apple has significantly complicated the lineup in its top tier products over the past several years. It used to be a single new iPhone and iPad model per year - keeping with the KISS principle that was once deeply rooted in Apple's DNA. Now it's much more complicated and they've grafted on a slew of new sizes and suffixes just to keep the complexity level at peak levels. Any notion of KISS has been obliterated as Apple seeks out every little niche that it can find on the outlying fringes of buyer preferences within the upper tiers of product pricing.

    The bottom line numbers don't lie, and Apple is sporting an immensely chubby wallet, but they are sort of losing some of the things that made Apple so simple and uncomplicated to love in the process of bloating up the catalog. Now you'd better have your act together before you walk into an Apple Store because you're going to have to choose from an array of products that have a lot of overlapping features and similar capabilities. Unfortunately there is no clear guidance coming from the Mega Ring in Cupertino. Should I get a MacBook? Or maybe a new MacBook Air? Why not move on up to the "Pro" embellishment, because you must admit, I really do deserve to be treated like a Pro and buying one seals the deal. Back in the KISS era the choices were fewer, but far easier. Apple isn't going to help me decide. The complexity on the phone side is no less onerous, and having the ghosts of iPhones that were once the shining stars still in the lineup doesn't help.

    I hate to say it, but this is all starting to smell and look a little bit like walking into the PC-o-Rama section in your local Best Buy, Walmart, Office Max, MicroCenter, or whatever, and trying to choose which of the shiny plastic, greasy, fingerprint covered, indecipherably different, Intel-Inside sticker bedazzled PCs or Chromebooks you want to lay down your someday-to-be-earned plastic cash on to take home and call your own. This is a bleak world that I hope Apple never fully embraces, but they are getting too damn close to the edge and somebody inside the ring has got to call them back to simplicity. The Apple Store design itself held things in check, but as they keep expanding the footprint, adding more tables, and pushing third party products and accessories up on to the walls in tidy little boxes, complexity is quietly creeping into the picture. Somebody has to step up and stop it.
    edited November 2018 atomic101
  • Reply 10 of 15
    red oak said:
    This article is missing a few keys points, 

    -  The author (Tripp Mickle) rarely gets things right regarding Apple.  His last major “expose”  predicted the company had a major inventory issue which proved to be totally wrong.  He is an Apple lightweight 

    -  Any production cuts are very likely already baked into the guidance Apple gave a couple of weeks ago 

    -  The WSJ gives zero details on any XS cut.  Just a blanket “orders reduced”.    Orders are reduced and adjusted all the time 

    -  This same exact story has surfaced at the same exact time in each of the last four years

    It seems like WSJ got 2-3 supplies to go negative on Apple and wrapped it with other info which was published by others last week 
    These articles are getting harder for me to digest, maybe I’m just getting old. I’ve had to read this thing several times due to the way it reads. Your comments seem to reflect what the author is saying but in a more concise and easy to read style. 
  • Reply 11 of 15
    blastdoorblastdoor Posts: 1,954member
    I saw an XR in person for the first time yesterday. It sure does seem thick compared to the other models! 

    If there really is weak demand for the XR, I wonder if that could be a part of the reason. And if so, that's kind of a wet blanket for everyone who criticizes Apple for choosing to make devices thinner at the expense of battery size. I must admit that I have sometimes wondered if Apple makes the right tradeoff there, but after holding an XR in my hand I'm persuaded that 'thin' is the way to go. 
  • Reply 12 of 15
    If these stories are fabricated, then it's a good thing for Apple and Apple shareholders. Big investors dumping Apple stock from fear simply makes it easier for Apple to buy back its stock at a lower price and helps serious investors such as Buffett to load up on more Apple stock. These unsubstantiated rumors may have some truth in them but as long as I'm getting my dividends, I'm not going to lose any sleep after hearing these stories. I've seen this type of fear run rampant for Apple a number of times over the years and each time Apple stock recovered and gained much more. It's sort of sad how Apple stock can so easily be manipulated by rumors but I suppose that's how it has to be. Nothing Apple does seems to give many big investors any confidence in holding onto their stock.
    edited November 2018
  • Reply 13 of 15
    lkrupplkrupp Posts: 7,312member
    If these stories are fabricated, then it's a good thing for Apple and Apple shareholders. 
    When have they ever not been fabricated? Just asking.
  • Reply 14 of 15
    tzeshantzeshan Posts: 2,008member
    blastdoor said:
    I saw an XR in person for the first time yesterday. It sure does seem thick compared to the other models! 

    If there really is weak demand for the XR, I wonder if that could be a part of the reason. And if so, that's kind of a wet blanket for everyone who criticizes Apple for choosing to make devices thinner at the expense of battery size. I must admit that I have sometimes wondered if Apple makes the right tradeoff there, but after holding an XR in my hand I'm persuaded that 'thin' is the way to go. 
    Why the camera still protrudes out so much if it is thick?
  • Reply 15 of 15
    While I don’t believe anything I’m this article I really do think apple should release a cheaper less expensive phone. A smaller XR -100$ cheaper would be great. The difference between XS and XR is not that big, but then you would rather buy a XS and then we’re talking about a really expensive phone. And I don’t want to buy one of the old ones. 
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