iPhone5 Component Cuts: What Analysts Think

There have been recent reports that Apple Inc. (NASDAQ:AAPL) is cutting orders for the parts required to assemble its iPhone5. The reason, however, for this trim, is beyond seasonal buying patterns and iPhone production increase, rather is there a decline in the demand for iPhones?

iPhone5 Component Cuts: What Analysts Think

A  source close to Apple Inc. (NASDAQ:AAPL), said the company is cutting its orders for iPhone component due to a sluggish demand for its phones. But many analysts cited a reason different from this, they said the cause of this recent development could be inventory stockpiling, an aggressive iPhone rollout or due to the initial stages of iPhone 5S production.

The report, which came a few days before the announcement of Apple’s next earning, pulled down the stock by 3 percent. Let’s have a look what the experts have to say about the recent report:

According to Vinita Jakhanwal, director of mobile and emerging displays at HIS, its evident that there’s a lower number of iPhone display orders from Apple in the latest quarter as compared to the previous quarter. The order ranged between 10 to 11 million compared to 19 million.

Paul Semenza of NPD also quoted the same number in a report by The New York Times. The NPD estimated Apple to order 19 million iPhone displays, but the order placed was within the limit of 11 to 14 million.

According to Jakhanwal, the seasonality and certain other reasons could be cited for this decline in component orders. “The reduction in display orders could be to align [it] to [the] shipment of other components like the battery, which is challenging to manufacture for the new phone and may not have been able to ramp up to the display numbers,” Jakhanwal told Wired via email.

According to Peter Misek, an analyst with Jefferies, the reason for this drop in component order could be the iPhone5S or the budget iPhone. The other reason he cited could be an “assembly bottleneck” due to which the component inventory stockpiled over the holidays.

Mark Moskowitz of J.P. Morgan holds the view that this cut could be due to improved manufacturing yields, and Apple was simply backpedaling on “excess order” of some parts.

According to Chris Jones, an analyst from Canalys, the competitive battleground is different from prior years. Some consumers are ready to forgo Apple Inc. (NASDAQ:AAPL)’s 6 year’s old operating system in order to try something new.

The belligerent roll out of the iPhone5, which covered almost 100 countries by the end of 2012, may be one of the reasons that its demand is declining earlier than normal. The iPhone 5 left a great task for its predecessors in wooing customers. The demand of the iPhone was not as strong as expected. On top of that, Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), with its Galaxy S III smartphone has emerged as a major competitor to Apple Inc. (NASDAQ:AAPL).