Apple reportedly cuts Q1 2013 iPhone orders in half

A new report claims that Apple recently cut its component orders for the iPhone in half due to weaker-than-expected demand.

Late on Sunday, the Wall Street Journal published a report claiming that Apple recently cut its component orders for the iPhone in half due to weaker-than-expected demand.

Apple's orders for iPhone 5 screens for the January-March quarter, for example, have dropped to roughly half of what the company had previously planned to order, two of the people said. The Cupertino, Calif., company has also cut orders for components other than screens, according to one of the people. Apple notified the suppliers of the order cut last month, the people said.

Now, this is all a tad confusing. By all accounts, the iPhone 5 was the most successful iPhone launch to date, both in terms of unit sales and the pace at which Apple rolled out the device worldwide. Indeed, Apple for some time was struggling to keep up with iPhone 5 demand. Now, it makes sense for sales to slip quite a bit during the January-March quarter, but reducing component orders by a full half seems curious to say the least.

Were Apple's projections for the upcoming quarter too optimistic? Is it possible that the initial momentum in iPhone 5 sales prompted Apple to raise its component orders too quickly?

It's also important to keep in mind that the fifth-generation iPod Touch utilizes the same screen as the iPhone 5. In other words, Apple reducing its order for LCD screens may also have something to do with iPod Touch demand as well.

Which brings us to another WSJ article sourced from the Nikkei newswire which notes:

Apple had planned to order from the trio enough panels for a total of 65 million units this quarter. But now, the U.S. company is believed to have notified them about roughly halving that figure.

Curiously, the 65 million figure was subsequently dropped from the article first cited above. Furthermore, the average consensus from analysts with regard to iPhone unit sales during the holiday quarter is about 52 million, the majority of which would be iPhone 5 devices. Coupled with estimates regarding iPod Touch sales during the holiday quarter, it stands to reason that the 65 million figure may have been Apple's component orders for this past quarter, not its order for the upcoming March quarter.

All told, the reports seem a bit suspect given the dearth of details and the curious 65 million figure which has since been removed. I'm not contending that the report couldn't be true, but getting into panic mode with so few subsantiated details seems premature.

Either way, investors aren't reacting favorably to the news, with shares of Apple down nearly 20 points in early morning trading. In pre-hours trading, the stock even dipped down below $500 for the first time since last February. That's quite a ways from the $1,000 share price some analysts feel Apple is headed towards.

Copyright © 2013 IDG Communications, Inc.

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