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Report Says Apple Inc. Has Slashed iPhone X Production by 50%

The latest report of slumping iPhone X sales has Apple telling its partners to cut iPhone X production targets by half

iPhone X production - Report Says Apple Inc. Has Slashed iPhone X Production by 50%

Source: Apple

Apple Inc.’s (NASDAQ:AAPL) iPhone X sales have been the source of constant speculation. One day suppliers are constrained, another there is stock in stores. Sales are disappointing, then they are doing better than expected. Now, the latest report claims Apple has cut planned first quarter iPhone X production by a whopping 50%.

The news comes just a few days before Apple’s first-quarter earnings, when we may finally get official word on iPhone X sales.

Whatever the news on the iPhone X — good or bad — it’s going to have a major impact on AAPL stock.

Apple Reportedly Tells Suppliers to Half iPhone X Production

Reuters posted news early this morning based on information from Japan’s Nikkei Asian Review. Apple has reportedly told its manufacturing partners to cut their Q1 production target for the iPhone X by 50% — bringing the number of flagship iPhones produced for the quarter to 20 million, from the initial order of 40 million.

Nikkei cited lower than expected iPhone X sales over the holiday season in the U.S., Europe and China as the reason for the cut.

Apple has not yet responded to the claims. But the matter will undoubtedly come up on February 1 when the company delivers its Q1 earnings report. If they have cut the production order, it’s obviously not good news for AAPL stock.

If there’s a bright side to this report for Apple investors, it’s that the same sources claim production for the more affordable iPhone models — the iPhone 7 and iPhone 8 — will remain at the same 30 million unit production target.

Ups and Downs of iPhone X Sales

It has been really difficult to put a finger on iPhone X sales. In the lead up to last September, iPhone X demand appeared sky high, and the anticipation caused AAPL stock hitting record highs.

Then, iPhone X production issues raised the specter of supply being unable to meet demand.

Pre-order sales seemed strong, with a backlog quickly building. But when availability quickly improved in November, analysts began to worry. Were more phones available because iPhone X production was finally humming, or had demand dropped?

Then, just after Christmas, an early report that Apple was cutting iPhone X production based on low demand quickly knocked 2.5% off AAPL stock.

Impact of Lowered iPhone X Production

If Apple has dramatically slashed its iPhone X production target, that will have a ripple effect throughout its supply chain. Manufacturers of components like Samsung — which makes the iPhone X’s OLED display — will take a hit, as will Foxconn, which assembles the iPhone.

Slowing iPhone X demand is also good news for Samsung, however; the company will be unveiling its new Galaxy S9 flagship smartphone in February.

Apple is likely to take a revenue hit, and that will be reflected in AAPL stock as well.

And if consumers are balking at the new flagship’s $999 starting price, that has the potential to change up Apple’s product mix for 2018. There are already predictions that low iPhone X sales are forcing the company to develop a cheaper iPhone X lookalike model for fall release, with an LCD display instead of OLED to keep the price down.

Hopefully, we’ll get a more definitive answer about what’s going on with iPhone X demand on February 1 during Apple’s Q1 earnings report.

The company doesn’t usually spike out individual model sales numbers. With rumors about iPhone X production cuts and dropping demand, however, it’s possible that Tim Cook might speak to the issue in order to calm investors. So stay tuned.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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