Apple cuts iPhone output
Published: 29 September, 2008
Apple has cut its planned production of iPhones in the second half of the year by up to 4m units, according to calculations by investment bank Pacific Crest Securities, in a move mainly geared to sustaining current pricing levels - but also perhaps indicative of lower than expected demand in certain markets, notably Japan.
Assuming the bank's intelligence is correct, the reduced figures would still put Apple in the position of turning out 14m to 15m handsets for the whole of 2008, down from the initial plan of 18m, but nevertheless making Apple a likely seventh or eighth in terms of handset sales for the full year, up from 29th place in 2007 (when the iPhone did not have a full year of sales, nor a 3G model).
Pacific Crest actually expects Apple to sell more iPhones than it had previously predicted, with the reduced manufacturing bill contributing to better margins and pricing power, and to more efficient inventory levels. The firm raised its iPhone unit sales projection to 11m from 8m. Other analysts also believe Apple will break the 10m barrier in 2008, getting it into the top 10 of handset makers - one of these is Forward Concepts, which believes the device maker will double its sales this year compared to 2007's 5m.
Like all phonemakers, Apple has to be ever more vigilant about its supply chain efficiencies as smartphone pricing comes under intense pressure. Its skills in this area, for now, mean it will be Apple's suppliers, rather than the electronics firm itself, that will suffer from reduced inventory and lower consumer spending.
The main Apple suppliers that are expected to take a hit from the vendor's cutback are Skyworks Solutions and Triquint Semiconductor, which both make power amps for the iPhone 3G, plus On Semiconductor and National Semiconductor. As in other parts of the smartphone sector, price cuts and manufacturing reductions will also cause problems for NAND memory makers like Sandisk and Micron.
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