According to sources cited by the Nikkei Asian Review, Apple has informed Taiwanese smartphone manufacturers Foxconn and Pegatron of the cancelation, which the report said signaled “disappointing demand” for Apple’s lower cost flagship model, which launched late last month.
“For the Foxconn side, it first prepared nearly 60 assembly lines for Apple’s XR model, but recently uses only around 45 production lines as its top customer said it does not need to manufacture that many by now,” a source familiar with the situation said.
That means Foxconn, the Taiwanese company traded as Hon Hai Precision Industry, would produce around 100,000 fewer units daily to reflect the new demand outlook — down 20% to 25% from the original optimistic outlook, this person said.
As for Pegatron, the iPhone assembler is said to be “suspending plans to ramp up production and awaiting further instructions from Apple,” according to Nikkei‘s supply chain sources.
Apple has reportedly also asked smaller iPhone assembler Wistron to stand by for rush orders, but Nikkei‘s sources said the company will receive no orders for the iPhone XR this holiday season.
Nikkei‘s reporting on iPhone supplies has been off the mark in recent years, with claims of Apple slashing iPhone production orders on weak demand being at odds with later sales figures.
The latest report also clashes with recent remarks made by noted Apple analyst Ming-Chi Kuo, who said that iPhone XR pre-order demand in the first three days of the device’s availability was “better than that” of the iPhone 8 and iPhone 8 Plus during the same period last year.
Kuo said that although pre-order demand immediately after launch has been lower for the iPhone XR versus the flagship iPhone XS models, overall iPhone XR shipment momentum is “more stable” because it will drive more customers to upgrade than the iPhone 8 series over time.
On the flip side, some analysts expressed concerns that the iPhone XR‘s strong availability following launch implied weak sales of the $749 handset.
In addition, Apple’s $89 to $93 billion revenue forecast for the first fiscal quarter of 2019 was cautious in its earnings call, but Apple blamed this on foreign exchange costs, issues with supply/demand balance, and weakness in emerging markets.
Apple CFO Maestri also explained that Apple had “some uncertainty” around supply/demand balance for the “unprecedented number” of new products the company had launched over the last six weeks.
The launch timing of the new iPhones was also said to be a factor, with the iPhone XR coming later than the XS and the XS Max. This had an effect on Apple’s Q4 revenue and is also expected to impact Q1.