Shares of Apple have taken quite a tumble this week, falling nearly 6% over the past two days of trading. Hardly a surprise, there have been a slew of reports indicating that Apple is slashing iPhone X production in the face of weak demand. And we’re not just talking about a mild scale back in production either. In fact, a recent report from Nikkei claims that Apple during the next quarter is curtailing iPhone X production by a whopping 50%, down to 20 million from an initial estimated production run of 40 million units.
Predictably, reports of iPhone X production cuts have sparked a series of lively debates about Apple’s flagship device in particular, and the strength of iPhone sales in general. While Apple doesn’t break down unit sales across specific iPhone models, we’ll have a better idea of how iPhone sales performed over the last quarter once Apple posts its earnings report later this week. In the meantime, I think it’s worth noting that reports of Apple scaling back iPhone production always seem to sprout up at this time of year, no matter how popular any particular device happens to be.
Last year with the iPhone 7, reports began surfacing in late December that sales of the device were disappointing. As a quick example, a report from Nikkei relayed that iPhone 7 sales were selling “more sluggishly than expected.”
The previous year, back when the iPhone 6s was Apple’s latest and greatest device, reports in early January of 2016 indicated that Apple was planning to scale back production by 30%. Nikkei once more figured prominently in these reports, with the publication noting that inventory had “piled up” in the face of “lackluster sales.
Now this isn’t to say that Nikkei is way off base with respect to the iPhone X, but you’d probably be well advised to view the report with a healthy bit of skepticism.
As Rene Ritchie astutely points out:
https://twitter.com/reneritchie/status/958319943249944581
And besides, it’s only natural that Apple would scale back production significantly now that the busy holiday quarter is behind us. Historically, iPhone sales during the March quarter are significantly lower than what Apple sees during the last three months of the year.
Lastly, the key metrics to look for when Apple posts its earnings report is how cumulative iPhone sales checked in for the quarter and what guidance Apple has for the March quarter. Indeed, amidst all the talk that iPhone X production is being cut drastically, Apple later this week may very well post its most profitable quarter in company history.
