Apple aims to increase iPhone output by 4% through March

Linda J. Dodson

TOKYO — Apple has notified several of its suppliers that it plans to make about 213 million iPhones in the 12 months through March 2021, up 4% from the same period a year ago, despite some suppliers’ belief that orders could end up being significantly lower, Nikkei has learned.

Apple has shuttered most of its stores around the world since mid-March as the novel coronavirus pandemic continues. But the company is expected to build up inventories of its new 5G phones due to concerns over possible component shortages, despite the possibility of falling global demand.

Apple released new models of its low-end iPhone SE series on April 15. It is also expected to introduce three to four new 5G phones. Shipments for the necessary components have already begun.

Production of current and new models, including the SE and upcoming 5G iPhones, will be split nearly 50-50, sources said. Apple was not immediately available for comment.

“Apple’s production outlook is pretty bullish, and we will need to assess whether it is based on a realistic demand [forecast],” said one executive at a components maker. “Actual production could be 10% to 20% lower,” he said.

Retail store closures have made it hard for Apple to gauge demand for its products. At the moment, most of its sales are online. Apple is therefore gearing up for the year-end shopping season by increasing inventories of new models.

With global smartphone demand likely to slow due to the virus, some parts makers want to gauge Apple’s production outlook cautiously.

A display procurement manager said: “Apple may want to adjust inventories so that they have sufficient stocks in the fall and on Christmas.”

Apple is expected to turn out roughly 200 million iPhones this year, about 10% fewer than its previous estimate of nearly 220 million phones before the coronavirus outbreak.

Although Apple will place official orders to its suppliers in May and June, the company has revised its outlook in the past. It may do the same if the pandemic continues. Apple announced in mid-February that it would temporarily limit the supply of iPhones due to the outbreak and would not meet its sales forecast for the January to March quarter.

The company’s supply chain relies heavily on China, and operating rates at assembly plants run by Taiwan’s Hon Hai Precision Industry and others in China remained sluggish through March.

While the disruption in Apple’s China supply chain appears to be easing, restrictions on operations at parts and semiconductor factories in the Philippines and Malaysia remain in place. With supplies still uncertain, Apple appears to be prioritizing inventory.

According to a Chinese government-affiliated think tank, March smartphone sales in China fell to 21.02 million units, a 21.9% drop on the year.

China’s big online retailers appear to be selling iPhones at discounted prices, and it is unclear whether Apple’s sales forecasts will hold. A slowdown in sales in the U.S. and Europe, where the coronavirus is still spreading, is also expected.

In an April 10 report, Mizuho Securities lowered its estimate for 2020 iPhone production to 198 million units, down from 205 million units. The report highlighted risks, including lower demand in Japan, the U.S. and Europe due to the virus.

As the epidemic drags on, Asian smartphone makers are also “starting to reduce their procurement of parts,” said an executive at a major semiconductor maker.

Along with the expected drop in demand, in primarily the U.S. and Europe, disruption of supply chains continues, with South Korea’s Samsung Electronics and China’s Oppo suspending operations at their smartphone factories in India.

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