Parts makers brace for iPhone production cut
TOKYO -- Apple is expected to reduce output of its latest iPhone models by around 30% in the January-March quarter compared with its original plans, according to several parts suppliers. The measure will deal a blow to Japanese and South Korean parts companies.
The U.S. company had initially told parts makers to keep production of the iPhone 6s and 6s Plus for the quarter at the same level as with their predecessors -- the iPhone 6 and 6 Plus -- a year earlier. But inventories of the two models launched last September have piled up at retailers in markets ranging from China and Japan to Europe and the U.S. amid lackluster sales. Customers saw little improvement in performance over the previous generation, while dollar appreciation led to sharp price hikes in emerging markets.
Output will be scaled back to let dealers go through their current stock. Production is expected to return to normal in the April-June quarter, once inventory adjustment is complete. Apple's products and brand have not lost their appeal, and older models have continued to sell.
Companies likely to see a drop in shipments include liquid crystal display panel manufacturers Japan Display, Sharp and LG Display, as well as image sensor supplier Sony and electronic parts makers TDK, Alps Electric and Kyocera. Businesses need to prepare for a potential year-on-year decline in iPhone output for 2016 as a whole, said Yasuo Nakane, a senior analyst at Mizuho Securities.
Apple also slashed iPhone production in 2013, forcing Apple-dependent parts suppliers to find ways to cope. They cultivated business with Huawei Technologies and other manufacturers in China, which had become a global smartphone supply base.