Stock futures fall after Apple scraps plans to ramp up iPhone production due to lack of demand

Apple shares fell on September 28 after the company scrapped plans to ramp up production of its new iPhone 14 this year due to suddenly reduced demand.

According an article in Bloomberg The day before, Apple executives had admitted that the electronics giant had overestimated consumer demand for its new iPhone 14 model this holiday season.

Apple shares initially fell on the news, but partially recovered by the end of trading, falling only 1.92% to $149.84.

The total stock loss this year is 18%, compared to a 23% drop in the S&P 500 index.

Apple had recently unveiled the new iPhone 14 and its accessories at a launch event on September 7 to much hype.

The new model includes an improved camera, emergency satellite services and longer battery life, but without a price increase.

The phone maker had optimistically raised its sales forecast in the weeks leading up to the September release, asking some of its suppliers to increase their production rate by 7%.

July saw an increase in iPhone sales at the end of its June fiscal third quarter, which beat expectations, leading the company to expect increased sales of the new phone.

However, within two weeks of the initial release, the smartphone maker suddenly realized that its early sales estimates had failed to materialize this month.

The California-based company immediately asked its suppliers to reduce production of its iPhone 14 product series, up to 6 million units in the second half of 2022, according to Bloomberg.

Apple has instead decided to focus on producing an additional 90 million handsets, the same amount as last year and in line with Apple’s summer projections for the fourth quarter.

However, demand for the more expensive iPhone 14 Pro was still higher than for the cheaper base versions of the model, according to Bloomberg.

Bloomberg also reported that at least one iPhone vendor plans to shift more of its production capacity to higher-end models.

Smartphone demand is slowing around the world

The consumer market for high-priced electronics, such as smartphones, has slowed due to rising global inflation, fears of recession, supply disruptions due to the war in Ukraine and the pandemic .

The smartphone market is expected to fall 6.5% to 1.27 billion sales in the fourth quarter, according to data from IDC, a marketing intelligence firm.

“iPhone 14 sales may be one of the best indicators of consumer sentiment globally, and that’s not a good sign,” Ron Palmeri, investment adviser at Arrington Capital, said in a statement. Tweeter.

Mainland China, the world’s largest consumer of smartphones, has faced a pandemic-induced economic crisis this year that has severely affected iPhone sales.

iPhone 14 sales in China are 11% lower than last year’s initial sales for the older iPhone 13, according to a note from Jefferies, the financial services group.

The disappointing release of the new model has caused a drop in the market value of key vendors such as Taiwan Semiconductor and Hon Hai Precision Industry, which rely heavily on sales of iPhone-related products for the bulk of their revenue.

Shares of Taiwan Semiconductor, which makes computer chips for smartphones, fell 2.2%, while the world’s largest iPhone assembler, Hon Hai Precision Industry, lost 2.9%.

Apple said on September 26 that it would shift some iPhone 14 production from China to India amid geopolitical tensions and supply chain issues in the East Asian nation.

All in all, concerns about the lack of demand for the new iPhone model are “more barking than biting,” Morgan Stanley analysts told Forbes.

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Bryan S. Jung is a New York native and resident with a background in politics and the legal industry. He graduated from Binghamton University.