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Apple is reportedly slashing iPhone X orders because it isn't selling well (AAPL)
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Several reports from Asia say Apple has slashed component orders for the iPhone X, its most important product.
Apple shares dropped on the news.
Apple CEO Tim Cook has previously said about component orders that "even if a particular data point were factual, it would be impossible to accurately interpret" what it means for iPhone sales.
Multiple reports suggest Apple has slashed some component orders for the iPhone X.
On Monday, Nikkei reported that Apple told suppliers it was cutting its first-quarter production target for the iPhone X in half to about 20 million units.
The Wall Street Journal followed that up Tuesday, also reporting that Apple was planning to make only 20 million iPhone X phones in the first quarter.
The Journal quoted a person familiar with the reason for the cut as saying "they always do this when things aren't selling well."
Apple's stock slid over 1% in trading after the Nikkei report on Monday.
The iPhone X is Apple's most important product. It was launched in September with a $1,000 price tag, the highest ever for an iPhone. It also came with the iPhone's first major redesign in three years.
At first, it looked as if supply of the device would be the problem given production issues, especially with the device's delicate Face ID camera. But Apple was able to largely fulfill the iPhone X orders it received during the holiday season. Now, as Apple's slow season kicks off, it looks as if the $1,000 price tag is hurting demand.
Apple declined comment to The Journal and Nikkei, but CEO Tim Cook addressed similar component concerns in a January 2013 earnings call:
"I'd also stress that even if a particular data point were factual, it would be impossible to accurately interpret the data point as to what it meant for our overall business, because the supply chain is very complex, and we obviously have multiple sources for things. Yields might vary, supplier performance can vary, the beginning inventory positions can vary, I mean there's just an inordinately long list of things that would make any single data point not a great proxy for what's going on."
This week's reports would put Apple's internal estimates in line with a recent estimate by the renowned KGI Securities analyst Ming-Chi Kuo. In a January 18 research note seen by Business Insider, Kuo revised his shipment forecast for iPhone X units in the January quarter to 18 million units, saying industry expectations were for 20 million to 30 million units to be shipped. He cited soft demand in China for the revision.
"The China demand softness and lack of uptake for iPhone X is the main culprit for the unit shortfall in March and June," the GBH Insights analyst Daniel Ives told Business Insider. He's still bullish that even with unit shortfalls in the short term, it doesn't change Apple's "underlying demand story."
Apple is set to report its holiday-quarter earnings on Thursday, where it will provide total iPhone sales from October to December. It will also give revenue guidance for next quarter that analysts can bake in to iPhone shipment estimates.
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