Apple's iPhone order 'cuts' causing supplier turmoil, despite forecast warnings
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
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.
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
- 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
This is pure manipulative....there should be laws against this
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.
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.
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.