Nikkei: Apple ordering fewer iPhone SE parts than planned

From Cheng Ting-Fang and Lauly Li's "Apple to cut iPhone, AirPods output amid Ukraine war uncertainty" posted Monday on Nikkei Asia:

Apple plans to make about 20% fewer iPhone SEs next quarter than originally planned, in one of the first signs that the Ukraine war and looming inflation have started to dent consumer electronics demand, sources briefed on the matter told Nikkei Asia.

Apple launched the iPhone SE as its first 5G-capable budget phone less than three weeks ago but is now telling multiple suppliers that it aims to lower production orders by about 2 million to 3 million units for the quarter, citing weaker-than-expected demand, four people told Nikkei Asia. The U.S. tech giant also reduced orders for its AirPods earphones by more than 10 million units for all of 2022, as the company predicted lukewarm demand and wanted to reduce the level of inventories.

The company shipped about 76.8 million units of AirPods in 2021, Counterpoint Research data showed, but people with knowledge of the situation said overall shipments for 2022 could likely see a decline.

Apple also asked suppliers to make a couple of million fewer units of the entire iPhone 13 range than previously planned, but said this adjustment was based on seasonal demand.

My take: Hard to separate the usual post-holiday seasonal declines from a actual drop-off in expected sales. Nikkei's FUD is famously hit-or-miss, but the smoke from "multiple suppliers" suggests there may be some fire here.

9 Comments

  1. Daniel Epstein said:
    Usually with rumors like these the market overreaction is more significant than the importance to the company of the results of the production adjustments. The narrative about the company does usually get changed as people will state this as fact which is usually not as accurate. Tends to happen after the stock has had a good run so my suspicion is it has the whiff of market manipulation.

    4
    March 28, 2022
    • What if Apple is simply cutting orders to ‘leaky’ suppliers and shifting that $$$ lucrative work to partners that don’t tell Nikkei what’s coming down the pike? Taiwan Semiconductor may not be replaceable but other vendors are.

      1
      March 28, 2022
  2. Neal Guttenberg said:
    I agree that it is hard to say whether this is real or not. I was reading a news item this am that said the Ming Kuo reduced his SE numbers from 25 to 30 to 15 to 20 million units. If that is true, than this is not an overreaction. But Kuo has been wrong before and it is hard to say what multiple sources really means. We will probably need to wait about a month to hear Apple’s next quarterly report to find out if this report is real or not. For me, I am holding onto all my shares right now.

    3
    March 28, 2022
    • Tommo_UK said:
      Neal remember that Ming also refers to the practice of burying Chinese emperors with their worldly possessions and his predictions also deserve to be buried more often than not.

      Not to sound too offensive but the guy basically whores for hits for a living after all and usually times his statements to fit a narrative often led by Toni Sacconaghi et al, routinely wide off the mark but “ranked number one apple analyst” for reasons which escape me, ie:

      2019: “Bernstein analyst Toni Sacconaghi predicts that Apple will generate over $500 million in App Store ad revenue this year, and about $2 billion by 2020”

      However…

      2021: App Store grossed more than $64 billion in 2020, according to an analysis by CNBC.That’s up from an estimated $50 billion in 2019 and $48.5 billion in 2018.

      Ok I’ve been a bit liberal with my lumping together of Apple’s App Store revenue against Toni’s metric of using ad revenue and using that as a foil for added hyperbole and jaw dropping comparisons but that’s what he does when he’s grabbing attention to sound informed and causing price action turmoil for his buddies to trade off but hey, who am I to call these people out; I’ve only been an AAPL investor and trader for 20 years after all >shrug<

      Ladies and gentlemen please place your bets in the Casino Royale but keep in mind predictions visible in the rear view mirror are often further away than they appear.

      3
      March 28, 2022
  3. Look at the history, even Philip’s “Related” section, April 28, 2021. If true, it’s a seasonal event, any experienced analyst can see as wise corporate planning, maybe inventory management. Advanced planning, knowing the new vagaries of China citywide quarantines and weaker summer sales. I prefer to think of it as part of a complex process to prepare for radically new products that will supersede existing model specs.
    In that perspective I am certain Apple will coming out with a revolutionary product designed to help people like me with hearing disabilities. AR glasses coupled with AirPods Ultra that interpret/ translate what the mics hear and run it as closed-captioning in my AR lens. Incredible, self-adjusting noise cancellation but maybe not AI-assisted lip reading, yet.
    The success of CODA at the Oscars sure gives Apple well-deserved attention for efforts in health & well-being. I wouldn’t be surprised to see them leverage it. When stateside I watched the Oscars since they were in black & white (we were the last to get a colour TV on our block). I never really expected my interest in films, costumes, makeup and set design to merge with my investments so subtly and pleasingly.

    4
    March 28, 2022
  4. Robert Paul Leitao said:
    *Sigh* Apple asks suppliers to commit to a particular capacity to produce a set number of components. The actual volume for the orders are clarified at a later date. This doesn’t mean supply orders were reduced or cut. It means the actual orders are different that the required capacity guarantees. We go through this every year (sometimes more than once). This is late March and the June quarter commenced yesterday. Apple has likely reached supply-demand equilibrium on all new product released last fall and channel supply on product is now within the desired range. Please remember Apple exited the December quarter with constrained product supplies and several billion dollars in sales pushed into the March quarter.

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    March 28, 2022
  5. Tommo_UK said:
    Sounds like new AirPods on the way leading to a change in component and manufacturing orders, and a tilt towards more expensive iPhone models than the SE which is a pattern often seen.

    Apple always seems to overestimate demand for its cheapest models in the face of higher than expected depend for the latest iPhones as subscription models offered through carriers make the 13 affordable to most people outside of developing nations.

    Nothing to see here except for the usual supply chain rubbish in what’s otherwise a slow news day with “journalists” getting bored of covid and Ukraine and trying to spin new narratives.

    2
    March 28, 2022
  6. Miguel Ancira said:
    If it is true, which it probably is not, it is because they are selling more higher priced models.

    This will be another breakout quarter.

    9
    March 28, 2022
  7. Rodney Avilla said:
    The fact that aapl ended up higher as the day ended, tells me that the street was able to process this ‘report’ as to what it really is, a FUD factor.

    0
    March 28, 2022

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