Apple is backtracking on its plans to ramp up production of its new iPhones this year. An anticipated spike in demand failed to materialize, according to people familiar with the matter.
The US tech giant has told suppliers to pull out of efforts to increase the assembly of the iPhone 14 product family. Efforts to increase has up to six million units in the second half of this year, the people said. Instead, the company will aim to produce 90 million phones for the period. It is the same level as the previous year and in line with Apple’s original forecast for this summer, the people said.
Demand for higher-priced iPhone 14 Pro models is stronger than for entry-level versions, according to some people. In at least one case, they added that an Apple vendor is shifting production capacity from lower-priced iPhones to premium models.
US stock index futures fell after the news, with contracts on the Nasdaq 100 falling as much as 1.3 percent. Key chipmaker Taiwan Semiconductor Manufacturing Company fell as much as 1.8 percent. Apple’s biggest iPhone assembler Hon Hai Precision Industry fell as much as 2.4 percent. Specialty producers Largan Precision and LG Innotek plunged more than 7 percent.
Apple had updated its sales projections in the weeks leading up to the launch of the iPhone 14. Some of its suppliers had begun preparing for a 7 percent increase in orders.
An Apple spokesman declined to comment.
China, the world’s largest smartphone market, is in an economic recession. China has hit its domestic mobile device makers and also hurt iPhone sales. Purchases of the iPhone 14 series during its first three days of availability in China were 11 percent lower than those of its predecessor the previous year, according to a note from Jefferies on Monday.
Global demand for personal electronics suppresses by rising inflation, recession fears, and the disruption of the war in Ukraine. The smartphone market expects to contract 6.5 percent this year to 1.27 billion units, according to data from market tracker IDC.
“The supply constraints that have been reduced in the market since last year have been eased. The industry has shifted to a market with limited demand,” said research director Nabila Popal of IDC. “High inventory in the channels and low demand with no signs of immediate recovery have caused OEMs (OEMs). It raises panic and drastically reduces their orders by 2022.”
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