Lackluster iPhone demand hurts more suppliers

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The new iPhones X go on sale tomorrow. Are you ready?
More suppliers reportedly hurt by cut iPhone orders.
Photo: Apple

More Apple suppliers are reportedly expecting to see their revenues decline as Apple reduces iPhone orders, amid “lackluster sales performance.” The companies named include Largan Precision, which makes iPhone camera lenses, and Career Technology, which supplies flexible printed circuit boards.

This follows on from a multitude of other similar recent reports, citing major Apple suppliers including Foxconn and TSMC.

Today’s Digitimes report notes that:

“As Apple has reportedly enforced a second wave of order reduction in the wake of weaker-than-expected sales for its new iPhones, many other Taiwan supply chain partners are beginning to feel the pinch in November.”

Largan Precision estimates that its revenues will fall starting November, Career Technology, meanwhile, has supposedly laid off 110 workers “to cope with order cuts by Apple.”

One other unnamed iPhone assembler has additionally started cutting its workforce. This is an attempt to reduce personnel costs amidst “greater-than-expected reduction of orders.”

How accurate are these reports?

The big question in all of this is just how much stock to put in these reports. Technology analyst Ben Bajarin recently warned that “trying to gain insight into Apple’s supply chain for signals is a fool’s errand.” This is because Apple frequently bulk orders components, and spreads them out across multiple suppliers. That means that looking at just one or two pieces of the puzzle can lead to seriously incorrect assumptions being made.

Anyone who followed last year’s iPhone X doom predictions will know that similar claims were made — only for analysts and other reports to turn out to be incorrect.

Nonetheless, Apple has suffered the brunt of these negative reports. As with other major FAANG stocks, its share price has plummeted over the past six weeks. It currently sits at $174.62, down from the $229.28 it traded for in early October.

So far, the only really official “evidence” that iPhone XR may not be quite where Apple wants them to be is the fact that it has cut the handset’s price in Japan. It will be interesting to see if this proves the start of a broader trend.

Changing trends

My take? I’d be surprised if the iPhone XR is proving a disproportionate failure, considering its strong positive reviews, and the fact that it is cheaper than last year’s iPhone X. Nonetheless, the smartphone market is certainly slowing down — which is why Apple has shifted to selling higher priced phones, rather than more phones.

With Apple’s burgeoning Services division, among other things, I expect Apple can weather the transition nicely. But companies which have increasingly relied on endless iPhone growth over the past decade? It’s no surprise they are running into problems.