Apple expects to produce at least 3 million fewer iPhone 14 handsets this year than it originally estimated. The company and its suppliers are now aiming to produce 87 million devices or fewer, compared with an earlier goal of 90 million, according to supply chain sources who asked not to be identified.
The main reason for the shortage is reduced demand for the iPhone 14 and 14 Plus models, which are cheaper alternatives to the higher-end Pro products. There are also supply issues in places like Zhengzhou, which is the main iPhone assembly base.
Sales of the iPhone 14 and Plus have cooled sharply since their launch, and the slowdown is deepening in China, according to a Jefferies analysis of the world’s largest smartphone market. Bloomberg News reported that Apple canceled plans to ramp up production of new iPhones this year after an expected surge in demand failed.
Nonetheless, Apple said on Sunday that demand for its iPhone 14 Pro and Pro Max devices remains strong, although production of those phones will slow due to problems at its Zhengzhou plant, but the company declined to provide specific figures.
Katsura, an analyst at SMBC Nikko Bank, on Friday, lowered his overall forecast for Apple’s 2022 production to 85 million new iPhones from 91 million. his revised forecast actually increases the expected production of the iPhone Pro model but cuts production of the standard version significantly.
“Some companies have begun to consider the potential impact of these changes on their earnings outlook,” Katsura and colleagues wrote. They revised their outlook “after this week’s confirmation of improved production and sales in China, as well as signs of production cuts at some material manufacturers.”
Apple declined to comment beyond an earlier statement about supply at its Zhengzhou plant.
The Zhengzhou plant, operated by Foxconn Technology Group, is known as the City of iPhones and is Apple’s main production center for assembling the iPhone Pro. The plant has seen worker discontent and exodus due to the way Foxconn has managed cases of coronavirus infection at the facility. The Taiwanese assembler subsequently raised wages and took additional steps to improve employee benefits, which Apple has also described as its top priority.
Foxconn’s main listed entity, Hon Hai Precision Industry Co. has traded relatively flat over the past week, while Apple shares have fallen for five straight days amid widespread skepticism about the outlook for its technology and consumer businesses.
The bigger problem for Apple in the coming weeks may be falling demand for iPhones, not supply.
