Apple Inc. Cuts iPhone 7 Production Amid ‘Fading’ Demand

Apple Inc. Cuts iPhone 7 Production Amid ‘Fading’ Demand
Image Credit: Apple Inc. (Screenshot)

During the first few weeks of their release, the iPhone 7 and 7 Plus were out of stock in most markets around the world. The initial sales were hot largely because of the excitement over the Jet Black color option and the discontinuation of Samsung’s Galaxy Note 7 due to battery explosions. But the euphoria is over and iPhone 7 sales have been “fading,” supply chain sources told DigiTimes.

New iPhone demand in China subsiding

The Taiwanese publication reports that Apple has asked suppliers to cut down on iPhone 7 production. Demand in China and other major markets has subsided significantly since the iPhone 7 launch in September. According to DigiTimes, suppliers expect the iPhone 7 and 7 Plus shipments in the first half of 2017 to be 5 million units lower than the second half of 2016.

Apple sells most iPhones during the September launch window and the subsequent holiday shopping season. The tech giant traditionally slows down iPhone orders towards the end of each year. KGI Securities analyst Ming-Chi Kuo said in a research note last month that suppliers would revise down their iPhone 7 component shipment forecasts by 5% to 15% in the last two months of 2016.

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Apple expected to sell 42 million iPhone 7 units in March quarter

Kuo said the new iPhones were out of stock during the first few weeks because of limited supply rather than strong consumer demand. The analyst blamed “lack of spec surprises” in the 4.7-inch model for the lackluster sales. The 5.5-inch version sold well because of the dual-camera system. The discontinuation of Samsung’s Galaxy Note 7 is estimated to have boosted iPhone 7 and 7 Plus sales by 5-7 million units.

Ming-Chi Kuo expects the new iPhone sales to fall in the range of 70 million to 75 million units in December quarter. It is much lower than the average Wall Street estimate of 78 million units. UBS Research analyst Steven Milunovich said earlier this week that Apple was cutting iPhone 7 build orders to avoid a stock build up. UBS expects Apple to sell 42 million iPhone 7 units in March quarter.

Suppliers conservative about iPhone 7 shipment outlook

Sources told DigiTimes that suppliers and consumers alike had turned their attention to the 2017 iPhone 8, which is expected to have an entirely new design. The next year’s iPhone is expected to feature an OLED display, an all-glass design, support for augmented reality, and wireless charging technology. Apple is said to launch three different variants of the iPhone 8:  4.7-inch, 5.5-inch, and a 5.8-inch model with a dual-edge display.

Apple suppliers are conservative about the iPhone 7 shipment outlook because of consumers’ high expectations on the 2017 iPhone. Analysts believe that the iPhone 8 could shatter all the previous sales records. It is estimated to sell between 120 million and 150 million units in the second half of 2017.

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