Stocks Dive on iPhone Concerns: Production Plans Cut Again and Again

In recent weeks, Apple slashed production orders for all three iPhone models that it unveiled in September.

The Wall Street Journal reports Apple Suppliers Suffer With Uncertainty Around iPhone Demand but it's not just the supplies getting hit.

The Nasdaq 100 is down close to 3 percent with the S&P 500 and Dow down close to 2 percent.

> In recent weeks, Apple slashed production orders for all three of the iPhone models that it unveiled in September, these people said, frustrating executives at Apple suppliers as well as workers who assemble the handsets and their components.

> Forecasts have been especially problematic in the case of the iPhone XR. Around late October, Apple slashed its production plan by up to a third of the approximately 70 million units it had asked some suppliers to produce between September and February, people familiar with the matter said.

> And in the past week, Apple told several suppliers that it cut its production plan again for the iPhone XR, some of the people said Monday, as Apple battles a maturing smartphone market and stiff competition from Chinese producers.

> At Foxconn Technology Co. , Apple’s largest assembler of iPhones in China, thousands of workers have voluntarily left earlier than they intended to after Foxconn cut overtime hours that are typically available during peak production periods, people familiar with the matter said. Many workers have come to rely on overtime as a key source of income. Foxconn declined to comment.

> “The freeway of Apple suppliers is littered with roadkill,” said Timothy Arcuri, an analyst with the investment bank UBS who tracks the iPhone supply chain. “That’s one thing when units are growing and another when units aren’t going to grow. There’s an argument to be made now: Why take the risk?”

Upgrade Cycle

The new iPhone models cost $749 to $1,000, up from $649 to $769 in 2016.

At what point do people say: "You know what? This upgrade isn't worth the price. I'll keep this phone for a while."

How about now?

Mike "Mish" Shedlock

Comments (13)
No. 1-11
bradw2k
bradw2k

The Pixel 3 has very similar "extra large" pricing. Did Google follow Apple into the land of sticker shock?

awc13
awc13

I keep my android phones until they break, replacing the battery as needed

JL1
JL1

Apple is trying to achieve current level of profits despite demand dropping by increasing prices so they get more profit per phone.

SMF
SMF

The simple issue is that at a certain point smart phones became good and powerful enough that people would replace them only if they have to, not because they want to.

stillCJ
stillCJ

Editor

I think today's stocks dive has more to do with the news that the American-Chinese trade agreement is still a LONG way off. However I am glad that we finally have a president who is addressing the issue of China stealing our technology.

Wagner_5
Wagner_5

Tesla is up.

Stuki
Stuki

With the speed at which phone tech evolves, it makes sense to upgrade fairly often. But a corollary to that, is that there is a limit to how pricey the phone makers can make their phones. Apple may just have jumped the shark with their $1000+ ask for the latest ones, despite genuinely useful features like face id.

Kinuachdrach
Kinuachdrach

At some point, every technology becomes a commodity. Then we see competition on price, and suppliers exiting the business. Apple needs either a meaningful technological innovation or a big improvement in price or performance. So does Mercedes-Benz.

Shipping lines, steel-makers, railroads have all had their day in the sun -- before finally becoming commoditized and much lower profit. Personal computers are already there. Phones will follow. The interesting question is where will the next comparable technology advance come -- along with its initial high profit potential? Automation equipment manufacturers? Artificial intelligence providers? Bio-medical devices?

Top-GUN
Top-GUN

Using a Samsung Galaxy Note 4. Probably 4 years old,,, one does lose track.. Replaced battery once in the comfort of my own home.... Works great,,, when/if it breaks I'll probably get something newer,,, but not the newest. Any reason this device shouldn't last 10+ years......or maybe 20....

everything
everything

Every dog has it's day.

MorrisWR
MorrisWR

I said enough after my 6 Plus. My current phone is a 6S Plus I got used on Ebay for a pittance (about $50 more than I sold my old phone for). Apple is a loser at this stage of the economic cycle.