According to a recent Bloomberg report, Apple AAPL is reducing the manufacturing of its newest iPhone 14 smartphones due to weak demand. In the second half of this year, the business requested its suppliers to curtail output by around six million units.
Apple currently expects to supply around 90 million iPhones during this time frame, which is stable year over year and in line with its previous forecast. In 2022, the business is projected to supply around 220 million iPhones, comparable to 2021.
Following the release, Apple shares fell 1.27% to settle at $149.84 on September 28. Taiwan Semiconductor TSM, which makes the iPhone 14 chipset, fell 1.23% to $72.13 per share. Apple and TSM shares were down 1.39% and 2.33%, respectively, in pre-market trade.
Apple has struggled in 2022, owing mostly to supply-chain issues, an industry-wide silicon scarcity, adverse currency exchange rates, and the Russia-Ukraine conflict.
Given the challenges, the near-term picture is bleak. Apple did not disclose sales projections for the fiscal third quarter of 2022. Apple anticipates COVID-related supply chain bottlenecks and an industry-wide silicon shortfall to cost them $4-$8 billion in revenue. Unfavorable currency exchange rates are also predicted to reduce revenue by 300 basis points (bps).
Price and Consensus for Apple Inc.
Furthermore, the absence of sales from Russia is likely to reduce the top line by 150 basis points. During the fiscal second quarter, Apple halted all sales in Russia (March quarter). Overall, Apple shares are down 19.5% year to date, while Taiwan Semiconductor shares are down 42.6%. Over the same time period, the Zacks Computer & Technology sector fell 33.9%.
Apple Reduced Manufacturing of Iphone 14
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IPhone Pro Devices Glow Among the Dread
On September 7, Apple revealed four new iPhone models: the iPhone 14, iPhone 14 Plus, the iPhone 14 Pro, and the iPhone 14 Pro Max.
The premium iPhone Pro versions are appearing in more demand than the apple iPhone 14 release and 14 Plus. Dynamic Island (a new design) and the Always-On display are available on the iPhone Pro (6.1-inch) and Pro Max (6.7-inch) variants. These devices, which are powered by an A16 Bionic processor, have a starting price of $999.
The slow demand for the iPhone 14 and 14 Plus can be linked to international pricing rises, roaring inflation, and a strong US currency. The iPhone 14 (6.1-inch) and iPhone 14 Plus (6.7-inch) with 5G capabilities are powered by the A15 Bionic CPU with a 5-core GPU and have an eSIM. These gadgets begin at $799 and $899, respectively.
Although Apple did not provide any unexpected new features in the newest iPhones, the firm improved the safety features by introducing Crash Detection and Emergency SOS via satellite. The latter function will be accessible in November to consumers in the United States and Canada, and it will be free for two years.
Diversifying Production Base Benefits the Company
Despite Apple’s explicit attempts to lessen reliance on device sales, the iPhone remains a primary growth driver. Its Services portfolio, which includes Fitness+ and Apple TV+, benefits from the iPhone’s large installed base. As a result, slowing demand for iPhone 14 devices is projected to crimp growth in the short future. Apple’s attempt to diversify iPhone manufacture into nations such as India and Vietnam, on the other hand, bodes well for long-term prospects.
Apple is steadily reducing its reliance on China for iPhone production. The next iPhone 14 has begun production in India considerably sooner than predicted. Foxconn, an Apple partner, is producing the iPhone 14 in the Sriperumbudur factory in Chennai. These gadgets are likely to be available for purchase in India later this year.
Apple Reduced Manufacturing of Iphone 14
By 2025, India is likely to be a key production base for Apple. According to JP Morgan analysts, Apple will shift 5% of worldwide iPhone 14 manufacturing to India by late 2022, and 25% of all iPhones would be manufactured in India by 2025. Apple is likely to profit from the strong momentum of the Services portfolio, which includes Fitness+ and Apple TV+. At the conclusion of the fiscal third quarter, Apple had over 860 million paying subscribers across its Services portfolio.
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