The holiday shopping season is behind us. Some analysts predicted that the iPhone 7 and 7 Plus helped Apple record its best ever holiday quarter. We will see a clear picture of the holiday sales when Apple reports its December quarter results later this month. But the first calendar quarter of 2017 does not look good for the iPhone maker. Based on data from suppliers, the Nikkei Asian Review says Apple would cut the iPhone production in January-March quarter.

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Image Source: Apple.Inc

iPhone 7 sales more sluggish than expected

It’s not the first time the tech giant is slashing the iPhone output due to sluggish sales. Apple had cut the iPhone production in January-March 2016 when the iPhone 6S and 6S Plus inventory accumulated at the end of 2015. Learning from that experience, Apple had curbed the iPhone 7 and 7 Plus production volume by 20% to avoid inventory accumulation.

Unfortunately, the new iPhones sold more sluggishly than the company expected. Nikkei reported that the company would cut production of both the iPhone 7 and 7 Plus in the January-March quarter. The 5.5-inch iPhone 7 Plus is still popular because of its dual-camera system. But Apple is facing a shortage of camera sensors, which curbed its ability to meet demand for the Plus version.

Apple to cut iPhone 7 output by 10%

Nikkei estimates that the flagship iPhone production would be cut by around 10% in the first quarter of this year. It could be because the latest iPhones don’t have compelling enough features to woo customers. Though iPhones remain the biggest revenue source for Apple, the “services” revenues have been growing steadily, which should help lower the company’s reliance on the iPhone.

Many analysts had predicted that the iPhone 7 would benefit from the Galaxy Note 7 debacle. However, holiday sales data from Flurry Analytics showed that the iPhones failed to capitalize on the Galaxy Note 7 disaster. Samsung fans proved loyal to the brand. Instead of switching to iPhone, most Note 7 users purchased another premium Samsung device.

iPhone 7 registers strong sales in Japan

The iPhone 7 sales in Japan remain strong, thanks partly to the availability of Apple Pay in the country. But Japan accounts for just 10% of the worldwide smartphone market, which is not enough to compensate for the sluggishness in other parts of the world. Nikkei said the Japanese suppliers would feel the pain of iPhone production cuts. But orders from Chinese Android vendors and automakers building self-driving cars would “soften the blow.”

Apple is set to unveil three different smartphones later this year. Two of them would be iterative upgrades to the iPhone 7 and 7 Plus. The third one, likely to be called iPhone 8, will have an all-new design with edge-to-edge OLED display and no physical home button.