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Report: Apple Pulling Back On iPhone XR Production On Soft Demand

Report: Apple Pulling Back On iPhone XR Production On Soft Demand

Apple Inc. (NASDAQ: AAPL) shares, which suffered a setback Friday in reaction to the iPhone maker's fourth-quarter print, could come in for further selling pressure in the wake of a report in Nikkei Asian Review that suggested weak demand for its latest iPhone model, the XR.

What Happened

Apple has told two key smartphone assemblers, Foxconn and Pegatron, to stop adding production lines for the iPhone XR model that became available for purchase in late October, the publication reported, citing unnamed sources familiar with the situation. 

Foxconn, which initially readied 60 assembly lines for the XR, is operating at 75-percent capacity on explicit orders from Apple, the story said. 

This translates to 100,000 fewer phones manufactured per day by Foxconn, according to Nikkei

The same message was also relayed by Pegatron, the report said. 

Apple has asked for more of the older iPhone models such as the 8 and 8 Plus, which are about 20-percent cheaper than the XR, according to Nikkei.

"Apple previously planned 20 million units for the older iPhone models this quarter, but raised the figure to 25 million units," the report said.

Why It's Important

It was only recently that Wedbush analyst Daniel Ives said the XR could help Apple further penetrate the Chinese consumer market in fiscal 2019. The analyst had estimated roughly 60-70 million iPhone unit shipments in the region, as China is on the cusp of an upgrade.

The sell-side has expressed concerns about a slowdown in China hurting Apple in 2019.

What's Next

The upcoming holiday season is likely to bring additional clarity for Apple. 

Cupertino recently issued a below-consensus revenue forecast for the fiscal first quarter, and iPhone unit sales in Q4 also disappointed. It compensated for soft shipment numbers with higher ASPs.

To make matters worse, Apple announced it would discontinue its practice of disclosing iPhone unit numbers.

The sell-side thesis that weak unit numbers for iPhones could be a thing of a past due to an anticipated strong take-off for the XR model is now being questioned in the wake of the Nikkei report.

Apple shares were down about 2 percent off the open Monday at $203.17.

Related Links:

Why Apple Will Likely Remain Sole Member Of $1 Trillion Club For A While

3 Reasons To Love Apple Right Now: iPhone, Services, Wearables

Photo courtesy of Apple. 


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