Apple Delays Mass Production of 2020 Flagship iPhones
April 27 2020 - 7:12AM
Dow Jones News
By Yoko Kubota
Apple Inc. is pushing back the production ramp-up of its
flagship iPhones coming later this year by about a month, according
to people familiar with the changes, as the coronavirus pandemic
weakens global consumer demand and disrupts manufacturing across
Asia, the heart of the consumer electronics supply chain.
Apple is forging ahead with plans to release four new iPhone
models later this year, people familiar with its plans say. The
phones, some with 5G connectivity, will vary in price and come in
three sizes -- 5.4 inches, two measuring 6.1 inches, and one at 6.7
inches, all featuring organic light-emitting diode, or OLED,
screens, the people said.
Apple's annual product refresh fuels the majority of iPhone
sales for an entire year, making new phones the linchpin of a
business segment that accounts for more than half of the company's
total revenue.
Investor anticipation for this year's 5G release helped send
Apple shares to record highs before the pandemic hit, as analysts
predicted the devices would lift a mature product line that last
year failed to ship more than 200 million units for the first time
since 2015.
Apple declined to comment.
Apple usually unveils new iPhone models in mid-September and
begins selling them before the end of the month. To do so, it
usually ramps up mass-production in the early summer, building up
inventory around August.
This year, while Apple would still be building some of the new
phones in the July-to-September period, the mass-production ramp-up
will slide back by about a month, the people said.
Apple is slashing the number of handsets that it plans to make
in the second half of this year by as much as 20%, one of the
people said. It isn't clear whether the slashed amount for 2020
would be pushed back into 2021 for manufacturing.
Cupertino, Calif.-based Apple is set to report quarterly
earnings on Thursday.
Meanwhile, Foxconn Technology Group -- Apple's biggest supplier
and a major assembler of iPhones in China -- has halted hiring at
its main iPhone plant in Zhengzhou in recent weeks, according to
people involved in the company's worker recruitment operations.
Taiwan-based Foxconn, formally known as Hon Hai Precision
Industry Co., declined to comment, saying it doesn't discuss
specific production facilities.
Investors and analysts have been anticipating a shipment delay
of this year's 5G iPhones since Apple said in February it would
miss revenue projections for the current quarter partly because the
coronavirus pandemic had limited iPhone production.
Bernstein analyst Toni Sacconaghi said in a recent report that
investors shouldn't worry about a delay unless Apple fails to ship
the iPhone before the 2020 holiday season, its biggest sales
period.
Apple has been doubly struck by the coronavirus pandemic --
first in China, where it closed stores and its assemblers shut
plants, eroding iPhone supplies -- then in the U.S. and Europe,
where it had to also shut stores and halt activities at its
headquarters in Silicon Valley.
While some stores in Asia have reopened and factories have
resumed production, Apple faces uncertainties in consumer demand in
the midst of a global economic downturn. The company relies on the
U.S. and Europe for about two-thirds of its total sales and those
markets are suffering under a historic economic contraction after
governments shut down most businesses to curtail the virus's
spread.
The coronavirus pandemic and resulting travel restrictions have
changed the way many companies develop products, as many engineers
find themselves unable to visit distant labs or suppliers to make
immediate adjustments to components or products.
Unable to travel to China earlier this year, Apple's U.S.
engineering team used video calls to guide Chinese colleagues
through iPhone prototype assembly at factories in Asia, people
familiar with the matter said.
Apple has delayed iPhone shipments in the past. In 2017, the
high-end iPhone X went on sale in November following production
glitches, while the iPhone 8 and iPhone 8 Plus went on sale in
September.
The later release pushed sales of the flagship iPhone X into the
company's fiscal year ended September 2018, when the higher-priced
device lifted annual iPhone revenue 17% from a year earlier to a
record $165 billion.
--Lekai Liu and Tripp Mickle contributed to this article.
Write to Yoko Kubota at yoko.kubota@wsj.com
(END) Dow Jones Newswires
April 27, 2020 06:57 ET (10:57 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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