Apple Continues To Fall As iPhone Production May Be Cut By 30%
Shares of Apple Inc. (NASDAQ: AAPL) continued to trend downward on Tuesday. Nikkei Asian Review reported that the tech giant is expected to cut production on its iPhone 6s and iPhone 6s Plus models by around 30 percent in the January-March quarter.
"[I]nventories of the two models launched last September have piled up at retailers in markets ranging from China and Japan to Europe and the U.S. amid lackluster sales," Nikkei Asian Review reported. "Customers saw little improvement in performance over the previous generation, while dollar appreciation led to sharp price hikes in emerging markets."
The publication said this "will deal a blow" to Apple's Japanese and South Korean competent suppliers. These companies include Japan Display, Sharp, LG Display Co Ltd. (ADR) (NYSE: LPL), Sony, TDK, Alps Electrics and Kyocera.
Update: Apple's stock closed at $102.871, down 2.5 percent on the day.
"Production is expected to return to normal in the April-June quarter, once inventory adjustment is complete. Apple's products and brand have not lost their appeal, and older models have continued to sell," the report said. "Apple also slashed iPhone production in 2013, forcing Apple-dependent parts suppliers to find ways to cope. They cultivated business with Huawei Technologies and other manufacturers in China, which had become a global smartphone supply base."
Last summer, Tim Cook reportedly wrote a letter to Jim Cramer that said, "I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks."
The letter continued, "Obviously I can't predict the future, but our performance so far this quarter is reassuring. Additionally, I continue to believe that China represents an unprecedented opportunity over the long term as LTE penetration is very low and most importantly the growth of the middle class over the next several years will be huge."
Earlier this week, FBR & Co. said that iPhone fears are "overblown."
China continues to be "the main fuel in the tank" for Apple going, despite lingering growth fears. While this is definitely a "turbulent" period for Apple and its investors, analyst Daniel Ives believes the bearish sentiment "has swung too far now."
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