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Technology

Apple slashes planned iPhone 12 mini production for 1H

Total iPhone target for 2021 still at 230m units despite global parts shortage

Demand for the 5G-capable iPhone 12 mini has been far lower than Apple initially expected. (Photo by Rie Ishii)

TAIPEI -- Apple is slashing its planned production of the iPhone 12 mini for the first half of this year as part of a broader adjustment to output plans it formulated late last year, Nikkei Asia has learned.

The U.S. tech giant is cutting orders for all iPhones by around 20% compared to its plans in December, according to sources familiar with the matter, with the majority coming from the mini, its cheapest 5G-enabled phone. Late last year, Apple told suppliers to secure components and parts for up to 96 million handsets, including the entire iPhone 12 series -- its first 5G-enabled lineup -- for the first six months of 2021. The total also included older iPhone 11 and the iPhone SE models.

At one point, Apple even told some suppliers that it needed components for more than 100 million iPhones for the first half of the year in a bid to secure components and production capacity amid global shortages.

The company is now targeting production of around 75 million units -- slightly higher than iPhone shipments in the same period last year. The company told suppliers that it still intends to build 230 million iPhones for 2021, an increase of more than 11% from last year, sources said.

The biggest revision is for components and parts for the 5.4-inch iPhone 12 mini, multiple sources said, which retails for around $699. Some suppliers were even asked to temporarily stop building components specifically for the mini, a source told Nikkei. The mildest estimate was that Apple will cut planned production by more than 70% for the six months through June.

"This year is still not bad, but of course demand for the first half of 2021 is not as high as people were thinking at the end of last year," another person told Nikkei.

The adjustment of production levels for the iPhone 12, iPhone 12 Pro and Pro Max was comparatively mild and demand for those models remains relatively healthy, several people said.

"Some of the components and parts for the mini have been reallocated to the iPhone 12 Pro and iPhone 12 Pro Max," said another person with direct knowledge of the matter.

Sources added that the downward revision also reflects a correction of Apple's previous aggressive booking of components and parts at a time when makers of smartphones, PCs, servers, automobiles and more were gearing up to fight for limited supplies of chips, print circuit boards, displays and other resources.

Jeff Pu, a veteran smartphone analyst with GF Securities, told Nikkei that Apple had misjudged demand for both the iPhone 12 Pro and the iPhone 12 mini.

"Consumers won't have that very strong feeling about the differences between core processors and about 5G wireless communication performance immediately, but they can immediately see the difference in screen size," Pu said. "If it's around the same price, many consumers would rather just pick the older iPhone 11, which has a larger screen, as they don't yet expect much from 5G."

Another problem for the iPhone 12 mini is its battery, an analyst at Isaiah Research told Nikkei Asia. "The battery for the iPhone 12 mini is much smaller than the older iPhone 11, which is about the same price, and it's smaller than the battery in the iPhone 12, which is only $100 more expensive. ... A 5G phone generally consumes more power, so consumers will be reluctant to buy a phone that, comparatively, does not have a good battery."

Sources told Nikkei that as of the end of last year, around 10% to 15% of Apple's orders for the iPhone 12 series were allocated to the mini.

The change in production plans poses a major challenge for Apple suppliers, who will be forced to quickly adjust their production utilization rates and labor resources, especially those that primarily supply parts for the iPhone 12 mini.

Apple itself, meanwhile, is still enjoying healthy demand for its premium models. Demand for the iPhone 11, first launched in autumn 2019, moreover, remains robust in emerging markets like India.

Apple shipped 74.3 million iPhones in the January-June period last year, according to research company IDC. The revised production plan of around 75 million units still represents slight growth from last year, though plans are subject to change in response to market dynamics.

Apple still maintains a full-year outlook of producing around 230 million iPhones, which would represent an 11.6% increase from last year. Sources say this is to maintain flexibility in case any of component shortages and to respond to further economic recovery in the second half of 2021. Last year, Apple sold 206 million iPhones, of which 90.1 million were shipped in the October-December quarter, IDC data showed. Apple's shipments rose 7.9% in 2020, despite the global smartphone market contracting 5.9%.

Meanwhile, Apple has rescheduled plans to begin mass producing two new MacBook laptops in the second half of the year, from the previous schedule of May or June, Nikkei has learned. The two MacBooks will be powered by the Apple Silicon processor as part of a two-year transition away from longtime supplier Intel's microprocessors.

While Apple has adjusted its iPhone production plans, the global chip and component shortage that emerged last year has weakened its bargaining power, sources said. The company has allowed companies with particularly tight supplies to maintain pricing levels, rather than asking for aggressive discounts each quarter as it has done over the past few years, they said.

Apple CFO Luca Maestri told investors in January that the company was experiencing some supply constraints but it estimated that supply and demand for the iPhone will reach a balance during the March quarter.

Apple declined to comment for this story.

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