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Apple cuts production orders for all three new iPhone models: WSJ

Published 11/19/2018, 12:08 PM
© Reuters. FILE PHOTO: A customer compares the size of the new iPhone XS and iPhone XS Max at the Apple Store in Singapore
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(Reuters) - Apple Inc (O:AAPL) has cut production orders in recent weeks for all three iPhone models launched in September, the Wall Street Journal reported on Monday, citing sources.

A lower-than-expected demand for the new iPhones and Apple's decision to offer more models has made it difficult to anticipate the number of components and handsets the company needs, according to the WSJ report https://www.wsj.com/articles/apple-suppliers-suffer-as-it-struggles-to-forecast-iphone-demand-1542618587.

Apple shocked investors a few weeks ago with a sales forecast for the Christmas quarter below Wall Street expectations, prompting certain suppliers to issue warnings that pointed to weakness in new iPhone sales.

Screen maker Japan Display Inc (T:6740) cut its full-year outlook citing weaker smartphone demand, while British chipmaker IQE Plc (L:IQE) said it expects a material reduction in its financial performance in the current year.

Lumentum Holdings Inc (O:LITE), AMS AG (S:AMS), companies which supply Apple with software needed for its FaceID technology, also lowered their forecasts.

Another supplier Analog Devices Inc (O:ADI) is expected to report fourth-quarter results before markets open on Tuesday.

Apple shares were down 3.7 percent at $186.38 on Monday, while Lumentum, Skyworks Solutions Inc (O:SWKS) and Qorvo Inc (O:QRVO) were down between 2.7 to 6 percent.

Forecasts have been particularly problematic for iPhone XR with Apple cutting its production plan by up to a third of the nearly 70 million units some suppliers had been asked to produce between September and February, WSJ reported.

As recently as last week, Apple informed several suppliers that it had lowered its production plan again for iPhone XR, the Journal said.

The company started selling its latest generation of phones, the iPhone XS and XS Max, in September and the XR model in October.

Analysts at Cowen & Co expect a modest hit from iPhone production cuts on memory chipmakers like Western Digital Corp (O:WDC) and Micron Technology Inc (O:MU).

The brokerage forecast a 10 cent headwind to Micron and 15 cent headwind to Western Digital in the fourth quarter of 2018 and the first quarter of 2019 on lower iPhone builds.

Micron's shares were down 3.4 percent while Western Digital was down 1.7 percent.

© Reuters. FILE PHOTO: A customer compares the size of the new iPhone XS and iPhone XS Max at the Apple Store in Singapore

Apple did not respond to a request for comment.

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