Monday, January 2, 2017

Disappointing iPhone Performance Forces Apple Into Drastic Action


Apple is cutting production of the iPhone by around ten percent in the first quarter of 2017, believes Nikkei Asian Review. Using data from analysts and examining supply chain orders, the daily Japanese publication believes slower than expected sales of Apple's latest smartphone will lead to a reduction of output during the next three months.

This isn't the first time that Apple has scaled back production on its flagship handsets. Last year saw the iPhone 6S and iPhone 6S Plus production scaled back in the first quarter of the year due to an abundance of units in the supply chain from over-estimated Q4 sales.

At that point the popularity of the iPhone SE was also in question so it made sense to keep the supply chain as lean as possible so any impressive SE sales would not result in stock lying around unsold - Apple continues to bias towards 'just in time' manufacturing to reduce the slack between manufacturing and selling a handset.

Apple also cut back on the production numbers of the iPhone 7 and iPhone 7 Plus for the initial availability of the new handsets. In part this would be down to supply limitations for the dual-lens camera components for the iPhone 7 Plus, but demand for the iPhone 7 was sluggish at best.

While the sales of the new handsets remain strong, they are not as strong as in previous years. As smartphones iterate themselves closer to a standard feature set, as the hardware gains that can be made each year become less of a technological jump over previous handsets and as some changes look to be more in favour of a manufacturers bottom line compared to user accessibility (see the courageous dropping of the 3.5mm headphone jack not he iPhone 7), consumer momentum to keep upgrading to the new handset lessens.

Apple can still command the sort of sales that other smartphone manufacturers would adore. But Nikkei's analysis of the production lines suggest that the slowdown in iPhone sales that became evident last year is continuing. With iPhone sales continuing to be the financial engine that allows Apple to explore and innovate in other areas, any drop in iPhone sales will be keenly felt throughout all of Cupertino.

MGCLS - LAX Car Service