Suppliers Prepare for iPhone Supply Chain Cut

Apple is expected to reduce output of its latest iPhone models by around 30% in the January-March quarter compared with its original plans, according to several parts suppliers.

The measure will deal a blow to Japanese and South Korean parts companies.

The U.S. company had initially told parts makers to keep production of the iPhone 6s and 6s Plus for the quarter at the same level as with their predecessors - the iPhone 6 and 6 Plus - a year earlier.

But inventories of the two models launched last September have piled up at retailers in markets ranging from China and Japan to Europe and the U.S. amid lackluster sales.

Customers saw little improvement in performance over the previous generation, while dollar appreciation led to sharp price hikes in emerging markets.

Output will be scaled back to let dealers go through their current stock. Production is expected to return to normal in the April-June quarter, once inventory adjustment is complete. Apple’s products and brand have not lost their appeal, and older models have continued to sell.

Read: Apple Suppliers Hope to Tap Into New ‘3-D Touch’

Companies likely to see a drop in shipments include liquid crystal display panel manufacturers Japan Display, Sharp and LG Display, as well as image sensor supplier Sony and electronic parts makers TDK, Alps Electric and Kyocera. Businesses need to prepare for a potential year-on-year decline in iPhone output for 2016 as a whole, said Yasuo Nakane, a senior analyst at Mizuho Securities.

Apple also slashed iPhone production in 2013, forcing Apple-dependent parts suppliers to find ways to cope. They cultivated business with Huawei Technologies and other manufacturers in China, which had become a global smartphone supply base.

We’ll get a much better idea about how iPhone sales have gone, and how Apple expects them to go this quarter, on January 26, when Apple releases its quarterly results and Tim Cook jumps on a conference call with financial analysts.

Customers Spent $1.1 Billion On Apple Apps This Holiday Season
In other news, Apple had a very lucrative holiday season, breaking all previous App Store records during the weeks of Christmas and New Year’s.

It seems that Apple fans were busy shopping for apps and in-app content in the holiday period, and they definitely didn’t shy away from purchases.

In a press release issued on Wednesday, Jan. 6, Apple announced that customers spent more than $1.1 billion on apps and in-apps purchases in the App Store, and that was only during the holidays. For the whole year, the total amount customers spent in the App Store goes all the way up to a staggering $20 billion.

Jan. 1 marked the biggest day in Apple’s entire App Store history, with customers spending more than $144 million to kick off the New Year in full force. The previous single-day record was not more than a week old, as it was set on Christmas day.

Related: What’s Wrong with Demand Forecasting?