The latest round of reported iPhone X production cuts couldn’t hold Apple Inc. (NASDAQ:AAPL) stock back on Wednesday. After the company announced plans to contribute $350 billion and 20,000 jobs to the U.S. economy, Apple stock surged in afternoon trades following a morning marked by a pair of analyst reports on iPhone X production cuts.
Another round of iPhone X production cuts reported
Digitimes reported on Wednesday that suppliers in Apple’s iPhone supply chain are preparing for low visibility into component orders for the iPhone X, 8 and 8 Plus in the first quarter. The Asian media outlet reported that component orders are expected to miss expectations by 15% to 30% during the quarter, mostly as a result of seasonality.
However, Digitimes also said that some sources argued that the iPhone X’s momentum was dragged down by slower-than-expected iPhone 8 and 8 Plus sales. Those sources reportedly said that sales of the iPhone 8 and 8 Plus had already started to slow during the fourth quarter. In fact, the media outlet adds that sales are so slow that some suppliers are even planning to stop production altogether in February for a brief period.
According to Digitimes, the reason for the temporary halt is because the low visibility into Apple orders and the Lunar New Year holiday period, which lasts a week, will reduce their rates of capacity utilization dramatically.
Warning that more iPhone X production cuts could be ahead
Credit Suisse analyst Akinori Kanemoto reminded investors that he said earlier this month that even more iPhone X production cuts could be possible very soon. He also said that now in the third week of January, he has learned of iPhone X production cuts for the first quarter. His note appears to confirm what Digitimes said, as well as claims from other analysts who said that iPhone X sales are weak, although he also attached a number to his note.
According to Kanemoto, iPhone X production plans have been cut to 19 million units “on an EMS maker basis.” Meanwhile, the forecast for device makers was slashed to 25 million units from 31 million in the second week of the month. However, he added that production plans for the iPhone 8 and 8 Plus were not significantly changed.
His sources reportedly told him that iPhone production plans for all models has been cut from 76 million units for the first quarter as reported in the second week of the month to between 60 million and 65 million as of the third week.
Despite the iPhone X production cuts, he added that even planning more than 60 million iPhone units in the January to March quarter is still a new record, higher than production plans for the iPhone 6 in January to March 2015. As a result, he said that the production plans for the iPhone “still look excessive” despite the cuts to iPhone X production.
Apple stock on the rise as iPhone X said to be selling well in China
In her own note covering Apple stock on Wednesday, Morgan Stanley analyst Katy Huberty chose to focus on iPhone demand in China, where she said Apple’s most expensive model ever is outpacing the iPhone 8 and 8 Plus. Based on her firm’s AlphaWise data, she said that data through the four weeks ending on Dec. 17 show that Apple continued to gain share of China’s smartphone market, which she said runs counter to the consensus view that the company is losing share. According to Huberty, Apple had a 21.3% share of the market in the four weeks ending Dec. 17, which put the company 250 basis points ahead of its next closest competitor.
She added that adoption of the iPhone X continued to climb faster than that of the 8 and 8 Plus, with the X capturing 1.64% of Apple’s user base in China, compared to 1.32% for the 8 Plus and 0.65% for the iPhone 8. She also pointed out that for the timeframe covered by their AlphaWise survey, the iPhone X had only been available for 72 days, versus 97 days for the other two models. Based on these numbers, she believes Apple has indeed turned the corner in China.
Apple stock closed up 1.65% at $179.10 on Wednesday, although it slipped in after-hours trades, erasing much of that gain.