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Apple warns suppliers of lower parts orders for new iPhones: Nikkei

12 Comments

Apple Inc expects to ship 80 million new model iPhones this year, down 20 percent from what it had planned at the same time last year, Japanese financial daily Nikkei reported on Friday, citing industry sources.

The California-based firm has asked suppliers to make about 20 percent fewer components for the three new iPhones it plans to launch in the second half of 2018, compared to last year's plans for its iPhone X and iPhone 8 models, the paper reported.

The report added to concerns that consumer passion for new editions of the iconic smartphones may be cooling after years of scorching growth, sending shares in Apple and many of its major suppliers lower and weighing on global stock markets.

"This news needs to be viewed in the context of Apple probably being overly optimistic last year in relation to the prospects for its new phones, leaving it with excess inventory in the first part of this year," Atlantic Equities analyst James Cordwell said.

"At least part of this lower order forecast probably relates to Apple just being a little more realistic."

Apple did not immediately respond to a request for comment.

The company sold 217 million iPhones, including its older models, in the fiscal year ended Sept. 30. It does not break down the figures by model and is still manufacturing large numbers of earlier versions of the phone.

Factset and Thomson Reuters do not provide estimates for new model iPhone sales.

Some analysts said they already expected Apple to sell fewer phones this year than last as global demand for phones tightens and competitors eat into its sales. The company sold 129.5 million iPhones in the past two quarters, little changed from the same period a year earlier.

Apple's shares fell as much as 2 percent on the report, while those in suppliers AMS and Dialog Semi sank 6 percent and 4.1 percent, respectively. Dialog's shares had slumped 17 percent last Friday after it said Apple would cut orders for its power-management chips by around 30 percent this year.

U.S.-based supplier Advanced Micro Devices, Micron Technology Intel, Broadcom Inc and Qualcomm Inc were all down between 1 percent and 4 percent.

Many analysts have said the high price of the iPhone X - which sells for $1,000 and is the first iPhone to sport a new design since the launch of the iPhone 6 in 2015 - is also muting demand for the flagship.

"Apple is quite conservative in terms of placing new orders for upcoming iPhones this year," said one of four industry sources cited by the Nikkei Asian Review.

"For the three new models specifically, the total planned capacity could be up to 20 percent fewer than last year's orders."

Top Apple analyst Ming-Chi Kuo said earlier this week that Apple might cut prices of new iPhones to debut later this year by as much as $300, according to several media reports.

Kuo said that Apple was likely to launch a 6.5-inch OLED"IPhone X Plus," a second generation of iPhone X and an iPhone with a 6.1 inch screen.

"As the improvements made to the iPhone each year become increasingly marginal it may become more difficult to convince consumers to pay up for the latest model, when an older generation device is effectively just as good," said Atlantic Equities' Cordwell.

While media speculation about demand for the iPhone X swirled in the past six months, Apple's market value has continued to rise and is now within striking distance of $1 trillion.

D.A. Davidson & Co analyst Thomas Forte also played down any fears.

"I am not overly concerned ... about the lower supply speculations," he said. "Apple is doing enough in general to keep the ball moving forward."

The iPhone is by far the biggest revenue generating product from Apple. However, in an attempt to offset the impact of a weakening smartphone market, the company has been focusing on services as a path to growth.

The unit, which includes Apple Music, the App Store and iCloud, posted $9.1 billion in revenue in the second quarter. For the fiscal year 2017, iPhones contributed 62 percent to the company's total revenue, while services accounted for 13 percent.

© (c) Copyright Thomson Reuters 2018.

©2018 GPlusMedia Inc.

12 Comments
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Hmmm not surprising... they've

(1) released an overly expensive phone that few can afford

(2) had their game of battery life reduction curtailed so people now arent fooled into buying a new phone,

(3) leaving 32bit phone/iPad users high and dry with no apps

(4) still keep assuive support staff who put the customer last and think the sun shines out of their own asses.

(5) copyright everything and come down hard on anyone seemingly nearing upon their look and feel... if God existed he would sue them for breech of the use of the word Apple, though they've probably thought of that one...

1 ( +3 / -2 )

They still make far more profit per phone than any other manufacturer giving them a virtually unlimited budget for further development. Its one of the reasons, that despite the incredible competition in the marketplace and a shrinking market share, they are still such a valuable company. Along with the whole Apple ecosystem which Android phone producers don't have and will never have.

0 ( +1 / -1 )

The iPhone Ecosystem is as the Chinese Communist state is to Democracy.

-1 ( +1 / -2 )

They still make far more profit per phone than any other manufacturer giving them a virtually unlimited budget for further development

And tax evasion.

Along with the whole Apple ecosystem which Android phone producers don't have and will never have.

Why would they need it? It's a proprietary prison. Android is something else.

-1 ( +1 / -2 )

Along with the whole Apple ecosystem which Android phone producers don't have and will never have.

Not sure what that means. I edit video clips shot on my Android handset on my Windows desktop PC, and play the completed videos on my Kindle Fire, It's a seamless, integrated experience.

My most important apps, like Office, Spotify, Gmail, etc. are mirrored on my PCs and they synch instantly and automatically. My books for my Amazon Kindle are synched with apps on my Android and Windows devices.

The difference is that I'm not beholden to a monopoly that charges monopoly prices, and I've got the choiice of thousands of diverse devices at upgrade time.

0 ( +1 / -1 )

While technically you’re right Jeff, it’s just a much smoother, easier experience overall. Everything in apples ecosystem is made to work specifically with the other things, not just with other things in general. So they integrate really well

1 ( +1 / -0 )

mmwkdw

(1) released an overly expensive phone that few can afford

Yes, but some people can afford it and it's popular. They also release more affordable phones. More to the point, there isn't a lot extra you can add to a phone to make it worth upgrading to these days.

(2) had their game of battery life reduction curtailed so people now arent fooled into buying a new phone,

Since when was fixing bad battery life and it's problems a bad thing? You may also note that the latest iOS 12, which is coming out later this year supports the iPhone 5s, which is 5 years old. Android doesn't come close to that level of longevity for their latest OS releases. Not only that, older devices will perform better with the latest OS.

(3) leaving 32bit phone/iPad users high and dry with no apps

This is more of a case of the developers of 32 bit apps leaving their users high and dry. Apple only make 64 bit apps.

0 ( +1 / -1 )

wipeout

And tax evasion.

Apple have never evaded taxes.

-1 ( +1 / -2 )

Apple have never evaded taxes.

Apple were paying 50 euros per million euros of profit "in Ireland" - though in fact the vast majority of these profits were generated elsewhere. The deal they cut with the Irish government was ruled illegal by the EU, and the Irish government is being forced to recoup $14.5 billion + interest.

The ruling was explained as follows: "Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules. The Commission's investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014."

Ireland's corporate tax rate is actually 12 percent, one of the lowest in Europe. If Apple ever approaches that rate on its European profits, then it might have a legitimate complaint about its treatment. However, colluding with a government to pay almost no tax is illegal under EU rules. Ireland is an EU member and agrees to abide by those rules.. Both Ireland and Apple are clearly in the wrong, and this behaviour swindles the Irish people - who do pay their taxes - and taxpayers across Europe.

It's tax evasion.

-2 ( +0 / -2 )

wipeout

*"The ruling was explained as follows: "Member States cannot give tax benefits to selected companies – this is illegal under EU state aid rules."*

The commission said Apple’s arrangements with Ireland, which resulted in low-single-digit tax rates, amounted to preferential treatment, thereby violating the EU’s state-aid rules. Making this case involved some creative thinking. The commission relied on an expansive interpretation of the “transfer-pricing” principle that governs the price at which a multinational’s units trade with each other.

What they also missed out was, that the deal that Ireland and Apple had made on their tax arrangements were not illegal when they were made 25 years ago. It was a case of shifting goalposts by the commission - deeming it illegal now and retroactively applying it.

0 ( +0 / -0 )

What they also missed out was, that the deal that Ireland and Apple had made on their tax arrangements were not illegal when they were made 25 years ago.

Those were made in perpetuity and remain legal regardless of any future EU-wide laws passed by an organization of which Ireland is a member, were they?

Making new law isn't shifting the goalposts. And by 2014, Apple only paid 0.005 percent of EU profits in tax - was that something they'd agreed with the Irish government back in 1992?

Making this case involved some creative thinking.

Paying next to no tax in a continent where Apple makes sells to 10s of millions of customers and makes vast profits involves criminal thinking. And Apple and the Irish government have been notified that this is illegal under EU law. It was no doubt nice while it lasted.

Illegally avoiding tax, by the way, is tax evasion.

-1 ( +0 / -1 )

Making new law isn't shifting the goalposts.

True. That only happens if you retroactively apply it, as happened here.

Paying next to no tax in a continent where Apple makes sells to 10s of millions of customers and makes vast profits involves criminal thinking. And Apple and the Irish government have been notified that this is illegal under EU law.

The amount of tax they paid isn't illegal. Ireland's tax rates were low to attract investment and to create jobs. Unemployment was over 12% in the eighties, so low corporate tax rates have helped Ireland and its people.

What is illegal in EU law is treating some companies differently than others. Ireland stands by its argument that it didn't treat different corporations differently and the dubious ruling by the EU commission is that it did.

However, this is not a case of tax evasion. Apple paid all taxes required under Irish law.

0 ( +0 / -0 )

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