SAN FRANCISCO--Apple Inc. may be cutting back on orders of components and parts for its latest iPhone 4S, due to weaker demand and shortages in the supply chain according to Chinese media reports.
Chinese-language Commercial Times said its sources in the iPhone 4 supply chain were claiming Apple could even cut its shipments of both iPhones and iPads from suppliers by as much as 10-15 percent in the fourth quarter, as strong pre-sale figures taper off.
The move will apparently impact Apple’s manufacturing partners, like Hon Hai Precision Industries Co. as well as component suppliers from case makers to camera builders.
The reports added that Apple’s decision would also impact global chipmakers, who have apparently indicated that their revenues could drop by a matching 10-15 percent as a result of the ordering adjustment.
Back in September, JPMorgan Chase & Co. released a report saying Apple would be cutting orders to vendors in the supply chain for its iPad tablet, which is said to have affected Hon Hai’s sales figures.
Similarly, Taiwanese outlet DigiTimes has also reported that several other Taiwan-based component makers had also seen October revenues drop as a result of reduced orders from Apple.
The reported cuts come at a time of increasing macro-economic hardships, with dozens of firms announcing they will be tightening their belts and preparing for a tough end of year quarter. Analysts have pointed out that Apple’s strategy has been to reduce inventory, so as not to be caught out by a lack of consumer demand.
“The bad economy will also have an impact on Apple,” said local Taiwanese tech commentator Sascha Pallenberg, adding that the initial rush on iPhone 4S phones could be attributed to Apple’s hardcore fanbase, as well as those upgrading their existing contracts with their telcos.
Since the iPhone 4S launch, however, Pallenberg points out that Google and Samsung have announced the Nexus S, Motorola has announced its Razr, Nokia has come out with new Windows phones, and Nvidia just rolled out its Tegra 3 chip, said to be headed for HTC phones very soon indeed.
“All these platforms look pretty competitive. Apple has never had such a tough competition and it won't get easier,” noted Pallenberg, though he said he remained confident Apple would still manage to post a record quarter.
"Apple is facing unprecedented competition and the world economic problems continue to hold down demand for products in this class," confirmed analyst Rob Enderle.
"Given the market conditions, it wouldn’t surprise me that Apple is pulling back, but Apple is typically hit last, suggesting if they are feeling it, others are likely feeling it more," he said. "This could be an early warning for the tech segment."