Another Report That Apple is Cutting iPhone Production

For the second day in a row, there is a report on Apple (AAPL) cutting iPhone production.

Tuesday, Craig Berger of Friedman Billings Ramsey said December quarter iPhone production was likely to be down 40% from the previous quarter, worse than the 10% production cut he had previously expected.

Wednesday, UBS analyst Maynard Um reports that his checks find “iPhone production and the associated supply chain may be experiencing some incremental weakness due to concerns about end demand.” Um says production in the December quarter could be 4 million units; he maintains his sales forecast for the quarter of 5 million, but writes that “there could be some downside risk to this estimate given a weakening environment and checks within the supply chain.” Um cautions that “supply chain order and production plans can vary from week to week,” but that “recent data points may suggest unit volumes weaker than our current estimate.”

Apple shipped 6.9 million iPhones in the September quarter; about 2 million of those are estimated to be in carrier inventory.

Apple was down $2.15, or 2%, to $108.84.

Comments

[GSlusher:]

Could this also be partly a result of "pre-loading" the supply chain for the holidays? Apple wouldn't want any supply problems during that busy time, so they may have pushed up their orders earlier and may slack off a bit in expectation of the usual post-holiday slowdown.

2008 Nov 05 08:27 PM

[brewer:]

There are a lot of good explanations for this, but the popularity of the iPhone looks not to be waning. And, Apple has been recession proof so far. They are actually selling MORE product this year than last (not just iPhone but Macs and iPods as well.) iPod is the only one that is even somewhat discretionary, and yet many people would quickly replace one that was broken or lost.

Production does go up and down, and it's not necessarily a direct relationship to demand, but also reflects the channel supply, etc... Plus, they were bound to ramp up a lot of them early on, to stay ahead of demand. So, demand can stay constant or even increase, but production might not follow, especially if a new product is coming. The original was on the market for a year and a half. The second generation might only last a year. They'd be stupid to keep producing them at a breakneck speed if they are also working on a new model.

All they would have to do is put in video conferencing, a larger screen, even a higher capacity battery, etc... and a great many people would rush to upgrade. This keeps the product going. Apple is not afraid to replace their top selling model with a new one (as they have done for many iPod versions.) It's not as if any 'competitor' is even close to making a knock-off of the FIRST version.

2008 Nov 06 11:31 AM

[Fremont Rea...:]

the stores seem as busy as ever, but as with any new hot technology, once the tech nuts (I mean early adopters) have it, things slow down until it becomes even cheaper.

2008 Nov 06 12:01 PM

[kris23:]

This is probably the millionth article to report this. For the last time, iPhone demand is not dropping that drastically. A cut back on production could be related to demand, but I dont necessarily think this is the case for Apple. Like brewer said, it could be more a channel supply issue. Apple has proven to be recession proof, sentiment is bullish (www.predictwallstreet....) even despite its fluctuating price.

2008 Nov 06 12:49 PM

[mollytjm:]

Apple is pretty smart and it would have been smart to order more iphones much earlier to make sure the chips were available for phones sold for the holidays. the king of prussia store is just as busy, even when the rest of that huge mall is slow. that doesn't mean Apple won't feel ANY effects of the economic situation...but i think they'll find a way to work around it.

2008 Nov 06 02:02 PM

[peter02l:]

"UBS analyst Maynard Um reports that his checks find 'iPhone production and the associated supply chain may be experiencing some incremental weakness due to concerns about end demand.'”

Three $5,000 checks!

2008 Nov 06 03:36 PM