Apple To Cut IPhone 6s And 6s Plus Production By 30% In Q1 2016

Apple Inc is expected to cut production of its latest iPhone models by about 30% in the January-March quarter due to mounting inventories, the Nikkei reported, rattling the nerves of investors in the US giant’s Asian suppliers.

As inventories of the iPhone 6s and 6s Plus have piled up since they were launched last September, production will be scaled back to let dealers go through their current stock, the business daily reported.

The report prompted a 2.5% drop in Apple shares, which have lost about a quarter of their value from record highs in April, reflecting worries over slowing shipments. Shares in the mainly Asian makers of the iPhones’ screens and chips were also sharply lower on Wednesday.

“This is an eye-opening production cut which speaks to the softer demand that Apple has seen with 6s out of the gates,” FBR Capital Markets analyst Daniel Ives said. “The Street was bracing for a cut but the magnitude here is a bit more worrisome.”

Among LCD panel makers, Japan Display Inc fell 4.7% while LG Display Co Ltd fell 3.4 percent.

Hon Hai Precision Industry was down 1.8% to trade around T$77.80, lows not seen in over four months. Hon Hai, which goes by the trade name of Foxconn, is a major assembler of Apple’s iPhones.

TSMC, the world’s largest chipmaker and which has supplied some of the chips used in Apple iPhones, was off about 1.1 percent to T$136.50, levels not seen since mid-November. Another Taiwanese assembler, Pegatron Corp, was off about 4 percent to trade around T$69.00, lows not seen in a year.

Other suppliers such as Japan’s Murata Manufacturing Co Ltd , Alps Electric Co Ltd and TDK Corp fell by 3 or 4 percent.

Production is expected to return to normal in the April-June quarter, the Nikkei reported.

However, Patrick Moorhead, an analyst at Moor Insights & Strategy, said he was a bit skeptical about the production cut reports.

“Apple has been gaining significant market share in pretty much every region, and I’m not seeing a global slowdown,” Moorhead said.

Apple was not immediately available for comment.

The parts suppliers cited in the Nikkei report were not available for comment outside their regular business hours.

Tepid forecast by Apple suppliers such as Jabil Circuit , which manufactures casings for iPhones, and Dialog Semiconductor GmbH in December stoked fears that iPhone shipments could fall for the first time.

Wall Street has also tempered its view on the high-flying stock in recent months. Since early December, about a third of the analysts tracked by Thomson Reuters have trimmed their estimates on Apple.

For fiscal 2016, Apple is expected, on average, to grow revenue by under 4%, a far cry from the 28% revenue growth it achieved in the fiscal year that ended in September.