December 31, 2016 2:00 am JST
Exclusive

Apple to slice iPhone production 10%

Sluggish sales spur January-March cuts for second year

Sales of the iPhone 7 proved disappointing.

TOKYO -- Apple will trim production of its iPhone family around 10% on the year in the first quarter of 2017, according to calculations by The Nikkei based on data from suppliers.

This comes after the company slashed output in January-March 2016 due to accumulated inventory of the iPhone 6s line at the end of 2015. That experience led Apple to curb production of the iPhone 7, introduced in September, by around 20%. But the phones still have sold more sluggishly than expected. Information on production of the latest models and global sales suggests cuts in both the 7 and 7 Plus lines in the coming quarter.

The larger iPhone 7 Plus, which features two cameras on its back face, remains popular. But a shortage of camera sensors has curbed Apple's ability to meet demand for the phones.

U.S. research company IDC forecasts global smartphone shipments in 2016 on par with the 2015 level. Even Apple has had difficulty creating appealing new features, stifling demand from customers who otherwise would look to upgrade to the latest device.

Japanese demand for the iPhone 7 line is strong, thanks in part to the phone's compatibility with contactless IC chip readers, commonly used for services such as payment. But this country makes up just 10% or so of the global smartphone market, and cannot compensate for sluggishness overall.

Japanese component producers will again feel pain from the coming cuts. But orders from Chinese smartphone makers, as well as growing demand for automobile technology linked to automated driving, will soften the blow. A source at a major parts producer called Apple's production cut "within expectations," saying the company has reduced the role Apple plays in its overall business.

(Nikkei)

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