Apple iPhones see a drop in Q1 production estimates amid low demand: Report

Apple is expected to make 45 million iPhones for the quarter which is down from 50 million.

Citi Research on 28 December reduced its first-quarter production estimates for Apple Inc’s iPhones and nearly halved expectations on the costliest iPhone XS Max, joining other brokerages in lowering forecasts amid reports of weak demand.

“The material cut in our forecasts is driven by our view that 2018 iPhone is entering a destocking phase, which does not bode well for the supply chain,” analyst William Yang wrote in a client note.

Citi said it expects the company to make 45 million iPhones for the quarter, down from 50 million it forecast earlier. The cut was mainly due to a weak outlook for the iPhone XS Max, Yang said.

Apple iPhone XS Max. Image: Tech2

Apple iPhone XS Max. Image: Tech2

The brokerage lowered its forecast for the number of units produced in the first quarter of iPhone XS Max, which starts at $1,099, by 48 percent.

According to a Wall Street Journal report in November, Apple cut production orders for all three iPhone models launched in September.

Shares in Apple’s Asian suppliers and assemblers slid in November after several component makers forecast weaker-than-expected sales, leading some market watchers to call the peak for iPhones in several key markets.

Citi has “sell” ratings on iPhone assemblers Hon Hai Precision Industry Co Ltd (2317.TW) and Foxconn Technology Co Ltd (2354.TW) said it sees Hon Hai as particularly vulnerable, with higher exposure to the new models.

In early December, TF International Securities analyst cut its first-quarter iPhone shipment estimate by 20 percent.

But other analysts remain positive on Apple. Also on Friday, analyst Tom Forte of D.A. Davidson reiterated his “buy” rating on Apple stock and a $280 price target based on a Reuters report earlier this week that Apple plans to begin using Foxconn to assemble some of its newest iPhone models in India in 2019.

Forte said in a note to clients he believes some of the declines in Apple’s stock in recent weeks has been related to concerns that a trade conflict between the United States and China could hurt the iPhone maker.

Increased manufacturing in India could help reduce tariff concerns around the iPhone, he wrote.

“While Apple has one of the highest exposures to tariff risks, it is also the best positioned to mitigate these risks. Part of this belief was based on the company’s size and ability to both negotiate pricing and terms with its manufacturers and move its manufacturing out of China,” Forte wrote.

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