Do reports of iPhone 5 part order cuts mean Apple’s in trouble?

By , Jan 14, 2013

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The Wall Street Journal reported last night that Apple has been contacting suppliers to reduce iPhone 5 part orders due to ‘weaker-than-expected demand.’ The story has made some serious waves today, causing Apple’s stock price to drop (at the time of writing) 16 points.

But for several industry watchers, including myself, the math on last night’s report just doesn’t add up…

Before we get started, let’s make sure we’re all on the same page. The Journal reported last night that Apple contacted multiple component suppliers last month to cut iPhone 5 part orders for the March 2013 quarter. It used screens as an example, which it says were cut 50%. The report was backed by Reuters, who cited a different source, claiming that Apple cut its original order of 65 million iPhone 5 screens in half.

This is where the math gets sketchy. On what planet would Apple expect to sell 65 million iPhone 5 in a quarter — especially right after the holidays? The company sells, on average, 29 million iPhones per quarter, and its record is 34 million. So where does the 65M come from?

Also, to believe the two reports, you’d have to assume that the operations wizard known as Tim Cook and his team fudged the numbers by 50% some where. But given Cook’s reputation, and Apple’s near flawless track record since he signed on, I can’t imagine that being the case.

So then what, assuming the stories from Reuters and The Journal are correct, could cause such a fluctuation in display parts? Well what about that ‘iPhone 5S’ that’s rumored to debut in late Q1, early Q2 of this year? Isn’t it supposed to have some sort of new touch-on-display technology? That sounds like a pretty good reason to me to reduce orders of current iPhone 5 screens, and to cut other components as well.

Or, as Instapaper’s Marco Arment suggests, this could all be nothing more than an attempt to manipulate Apple’s stock price:

“But the biggest reason this smells wrong to me is the timing. Apple’s stock has been depressed for a few months, and many analysts (and much common sense) suggests that it’s probably very underpriced considering Apple’s financials. This news has sent it down another 3% today alone, and it will probably fall further over the next few days.

But next week, Apple reports its earnings for the quarter that included the iPhone 5’s release and the holidays. Most reasonable predictions suggest that it’s going to be very good news. As with good quarterly-earnings reports in the past, the stock could shoot up, and anyone who bought a bunch of it recently at a steep discount could make a lot of money.”

Exactly. I wouldn’t be the least bit surprised if this all had something to do with stock manipulation. People do it all the time, and what better time to do it with Apple stock than when it’s already ridiculously undervalued? You could stand to make a fortune if the cards fell just right.

And they’re expected to. Apple is believed to have sold in upwards of 50 million iPhones and 24 million iPads during the holiday quarter, which would both be company records. And that would, assumably, mean it also saw record revenue and profit for the quarter as well.

So, to answer the headline’s query, do these reports of supply cuts mean Apple is in trouble? No. The reports were vague, anonymously-sourced, and as you can see, their presumed ‘due to weaker-than-expected-demand’ argument is seriously flawed. We’ll find out for sure next Wednesday when the company reports its holiday quarter earnings, as well as gives its guidance for the March quarter.

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  • 4p0c4lyps3

    Not necessarily considering apple is now implementing a bi-yearly product refresh. You never kno tho, this cld just b the beginning of the end and apple has no one to blame but their vanilla ass selves.

  • jose castro

    they could just be saving money.. lol new always blows something out of proportions…

  • Lordthree

    It’s these goddamn hedge manipulations. Same thing happened same time last year with the 4S

  • http://twitter.com/AlamarMarine Spencer B

    I do think there are a whole bunch of people who did not see the iPhone 5 as a big enough deal to upgrade. I can believe that demand is not as big as Apple expected. Don’t get me wrong I am a big Apple fan but like many, I am getting bored with iOS and Apple’s uninspiring hardware upgrades. I want something a bit more cutting edge. Something that the competition hasn’t got, like the original iPhone had. Sadly I think those days went with Steve!!

    • pauleebe

      May be true, but I think it is more to do with carriers being strict with 2 year upgrade agreements as oppose to allowing for early full upgrades FOR iPHONES. The in-store persuasion to buy WP and Android instead is disgusting too. Most people don’t care that iOS is stale, they just want a functioning smartphone with lots of apps.

      • Emre SUMENGEN

        Adding to yours (with respect to Spencer B’s comment), I see “compatible” and “ease” where Spencer says “stale”…

        And, that’s a BIG plus for me…

    • http://twitter.com/El_Barto_01 El Barto

      I think apple sold more iPhones than last year and the biggest since the iphone was release. All it takes to know this is to see how iPhones fly of the shelves at any store that carries them. Now analyst may say what they want but it can also be apple is about to move into 6 month cycles to better compete with android which releases a new phone by the hour. So from 1 year to 6 months. Maybe the drop is to move the next generation iphone 5S to market.

    • Steve Lang

      Those ‘whole bunch of people’ said the same thing about the iPhone 4S.

    • Fact_Seeker

      Spencer B “I do think there are a whole bunch of people who did not see the iPhone 5 as a big enough deal to upgrade. ”

      Have you actually tried an iPhone 5? Not only is it thinner and lighter and beautifully made, but it is incredibly fast. I tried mine side by side with a friend’s Galaxy S III. Both were 4 LTE and the iPhone was twice as fast and it had a far brighter and clearer screen. She was amazed at the difference!

      And independent tests have shown that the iPhone 5 is by far the fastest smartphone on the market. Only the iPad 4th Gen is faster! Check out peacekeeper.futuremark.com/results?key=stats

      and

      appleinsider.com/articles/12/09/24/iphone_5_outperforms_samsungs_galaxy_s_iii_in_display_test

      Also the iPhone 5 has got the highest ever rating from gdgt.com who collate and average more than 50 critics reviews.

      As for the Reuters’ and WSJ’s FUD about lack of demand, if you check Statcounter Global Stats you will see that the iPhone has been selling like hotcakes and gaining market share Worldwide and even in China, as well as in the US, where iPhone market share has surged to 53% market share, according to Kantar research.

  • chjode

    I think It’s clearly a stock manipulation tactic and iDB fell for it– hook, line, and sinker. Note that this story is #3 today on iDB about this same topic.

  • http://twitter.com/SteveFrawley Steve Frawley

    It could be that Apple will be releasing iPhone 6 with NFC sooner than expected with a China Telecom version. It could be a great sign and not a bad one.

  • http://twitter.com/SteveFrawley Steve Frawley

    I think today was the bottom, so I bought more AAPL too.

  • pauleebe

    APPLE IS DOOMED.

    How many times a year do these headlines loom through every facet of the media.

    Apple is fine, cutting supply is typical for this time of the year, especially with new product announcements around the corner. Demand for the iPhone 5 in the post-holiday rush seasons are OBVIOUSLY far lower than that of the holiday season.

  • http://twitter.com/idrakemiller Drake Miller

    Thumbs up if you think that making iOS more open for Jailbreak-like tweaks and themes for iOS will give a refresh for Apple stock

    • chjode

      and writing in complete sentences!

      • http://twitter.com/idrakemiller Drake Miller

        Lol, missed

  • jilex

    and i think you didn’t see it as “maybe apple is going to boy that many to start producing for the next quarter” because i think i recall you posted that it was complicated to assemble the so called “rolex of smartphones” (don’t know if i made my point, but if i didn’t please just ask)

  • http://twitter.com/J_Walker75 The Pied Piper

    Why report on things that are dumb? Isn’t this the same ppl that said there will be a cheaper iPhone just last week? and everyone ran with the story. Just to find out they were wrong. Whatever happened to get the facts right before you report it?

  • http://twitter.com/El_Barto_01 El Barto

    Same old same old these reports are making someone very rich and they pay good money to “analyst” and blogs to run these stories. And also the dump asses who pick them up, apple just sold the most iphone it is history, they probably made more money than last year and still Wall Street says it is not enough. This is a tactic that pays since by making apple look bad the sticks takes a hit and they profit. The goverment should just fine everyone on this cause it affects the little investors. And since apple is the most talked about company on earth them we get worse and worse. Unless apple takes this with their legal team and starts calling the FTC the analysts be hedge funds will always play a number on the stock

  • Jeffery Pierre

    I have my money in hand just waiting on a jailbreak

  • http://twitter.com/Pabzley CaptainPabzley

    Fake as hell. This information is too sensitive to be true and in the same time available to the public like this. I’m glad that somebody is thinking not only reposting crazy rumors.

  • http://www.facebook.com/sanil.chitrakar Sanil Chitrakar

    Apple stock price dropping and cody is panicking. lol. Sorry cody sell your stock right now because it will only continue falling from here on.
    Is it those rumours trying to manipulate people to sell their AAPL or is it you trying to manipulate people the other way.
    Like pod2g said “many people who were a long time iphone owner switched to android”. This must be the reason apple is losing its demand. More and more people are upgrading their iphone with samsung. And that’s a fact.

    • Blake

      I dont think that you know what you are talking about. Do you know that as of late Apple now has a higher percentage of smartphones in the US compared to android? Androids market share fell, and Apples rose. Some people are migrating to android. But not a high rate. It is actually negligible to be quite honest. Apple isn’t going anywhere, nor are its millions of loyal customers.

  • @dongiuj

    No, it means they need to make a real phone with real upgrades.

  • kienyyyyy

    wee just suck in apple brand that all .
    The iphones whatever model still same shit

  • kienyyyyy

    why people want them to release new phone when they don’t get the use out the old phone in first place