Apple Suppliers Drop in Asia After IPhone Output Cut Report

  • Nikkei Asian Review reports cut of 30% in first quarter
  • Analysts began predicting a 2016 sales slump in December

Putting Apple’s iPhone Production Cut Into Perspective

Apple Inc. suppliers led by Sharp Corp. and Pegatron Corp. fell after Nikkei Asian Review reported the U.S. company would reduce the first quarter output of its latest iPhones by about 30 percent.

Sharp dropped 3.3 percent as of the close in Tokyo trading. Japan Display Inc. slumped 3.5 percent. The Japanese companies both supply screens for Apple devices. Pegatron, which assembles iPhones, fell 5.7 percent in Taipei.

Inventories of the new iPhones, which debuted in September, have piled up at retailers in China and Europe amid lackluster sales as an increase in the dollar against emerging markets currencies makes the device more expensive in those countries, Nikkei reported. Apple had initially told suppliers to keep production of the iPhone 6s and 6s Plus models for the January-March period at the same level as for their predecessors, the publication said.

“There is a risk inventory adjustment will continue and will not be over by March,” said Yasuaki Kogure, chief investment officer at SBI Asset Management Co. 

Sharp spokesman Toyodo Uemura and Ryoichi Imai, a spokesman for Japan Display, declined to comment on the report. Kristin Huguet, a spokeswoman for Cupertino, California-based Apple, declined to comment.

Inventory Buildup

TDK Corp. dropped 4 percent, while Hon Hai Precision Industry Co. closed little changed after dropping as much as 2.3 percent. Samsung Electronics Co. fell 2.7 percent in Seoul and Taiwan Semiconductor Manufacturing Co. was 1.8 percent lower.

Toward the end of last year, many analysts began predicting that sales of Apple’s best-selling product would slump in 2016, based on supply chain issues and weaker demand especially from saturated, developed markets. Apple’s growth is increasingly dependent on demand for iPhones, while iPad tablet sales decline and adoption of the Apple Watch remains modest. Apple predicted in October that it would have another record holiday quarter.

“With poor end demand for iPhone 6s in developed markets, we estimate that the supply chain has accumulated 20 million units of iPhone inventory including finished goods and components,” Ken Hui, an analyst at Jefferies Group LLC in Hong Kong, wrote in a report.

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