AAPL Apple Inc

Timeline is extended a month due to weaker consumer demand and factory disruption

By Yoko Kubota 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 28, 2020).

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 28, 2020 02:47 ET (06:47 GMT)

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