Dive Brief:
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Reports that Apple component supplier Foxconn Technology Group may receive more than $12 million from a Chinese government agency to mitigate layoffs there are seen as evidence that Apple is scaling back production of its iPhones.
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Sources familiar with Apple’s supply chain also told the Wall Street Journal that the tech retailer has indeed scaled back its orders. And other reports from Japanese news outlet Nikkei have detailed expectations that Apple will reduce its plans for output of its latest iPhone models by nearly a third in the January-March quarter compared with its original plans.
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Apple declined to comment, saying it never does comment on supply issues, and Foxconn wouldn’t say whether its layoffs were related to iPhone production, according to the Wall Street Journal.
Dive Insight:
These reports regarding buildup of Apple’s iPhone inventory are weighing on the company’s stock and could have a ripple effect in the Asian supply chain that manufactures the devices’ parts.
The economic stumbles in China could weigh especially heavily on Apple, which will likely see much of its growth among consumers there.
But at least one analyst believes that Apple is poised to beat expectations in the long term.
"With only 30 percent-plus of Apple's user base upgrading to iPhone 6/6s to date, there is a massive green field opportunity to further penetrate its unrivaled customer base over the coming years, with China remaining the main fuel in the tank for Cupertino going forward despite lingering growth fears," wrote Daniel Ives, managing director and senior analyst at FBR Capital Markets.
Certainly, despite news of weakness in the Chinese economy, the country is experiencing strong growth nevertheless as it transitions to a consumption-driven economy.
"While [iPhone] 6s demand has not been stellar out of the gates relative to bullish Street expectations, we believe this near-term product transition period will ultimately lead to brighter days ahead on the shoulders of the flagship iPhone 7 release," Ives also wrote in a research note. "Apple is poised to benefit from pent-up consumer demand/mega product cycle heading into September 2016, in our opinion.”
