Worried About Demand, Apple Tells iPhone X Suppliers To Slow Down Component Delivery
by Tyler Durden
ZeroHedge.com
Sep 25, 2017
Following an embarrassingly dull rollout of the iPhone 8 last week, Apple’s woes may be spreading to its flagship gizmo for the current product cycle, the iPhone X.
As Digitimes reports, Tim Cook’s company has instructed component suppliers to “withhold part of the component shipments prepared for the production of iPhone X devices” according to unidentified Taiwan-based upstream suppliers.
The reason for the delay is that Apple is waiting to see the pre-sale orders of the iPhone X as well as the sales performance of the iPhone 8 and iPhone 8 Plus before pushing the production of iPhone X into full gear, said the sources.
The sources explain that iPhone X component suppliers are currently shipping parts and products that amount to only about 40% of the quantities originally planned for the initial production of iPhone X. However, despite the instruction for shipment slowdown, some suppliers still need to step up production to meet the 40% requirement due to low yield rates at their production lines, the sources indicated. Apple is said to have adopted the same strategy previously for iPhone 7 in 2016 – a phone which met with lackluster demand – during which initial shipments of parts and components reached only about 60% of the materials originally required by the vendor, with sources adding that Apple pulled in the remaining 40% of orders 1-2 months later.
Meanwhile, as Bloomberg reports this morning, in a double-whammy for Apple suppliers, their stocks have gotten hit in recent days on what is perceived as market disappointment with the company’s latest product offering: on Monday Hon Hai fell 2.8 percent in Taipei, while Pegatron slumped 4.4 percent. TSMC dropped for a third day. AAC Technologies Holdings Inc., another supplier, retreated 6.7 percent in Hong Kong, and GoerTek Inc. capped its biggest loss since July 3 in China’s Shenzhen.
Hon Hai Precision Industry Co., which assembles the iPhone and other Apple devices, has fallen 10 percent in Taipei since Apple unveiled its collection of new gadgets for the holidays this month. Other suppliers across the region, including Taiwan’s Pegatron Corp. and South Korea’s LG Innotek Co. have plunged more than 12 percent. Taiwan’s $1.1 trillion equity market is particularly exposed to the swinging fortunes of Apple products, due to the dominance of parts manufacturers. Hon Hai and Taiwan Semiconductor Manufacturing Co., Apple’s main chip-maker, together make up a quarter of the Taiex total weighting, while exports account for more than half of the island’s gross domestic product.
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