Apple has closed most stores worldwide since mid-March as the new coronavirus pandemic continues. But the company is expected to stockpile its new 5G phones due to concerns over possible component shortages, despite the possibility of lower 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. Deliveries of the necessary components have already started.
Production of current and new models, including upcoming SEs and 5G iPhones, will be divided by almost 50 to 50, sources said. Apple was not immediately available for comment.
“Apple’s production outlook is fairly optimistic, and we’ll have to assess whether it’s based on realistic demand [forecast] Said a manager of a component manufacturer. “Actual production could be 10% to 20% lower,” he said.
Retail store closings have made it difficult for Apple to gauge demand for its products. For the moment, most of its sales are online. Apple is therefore preparing for the end-of-year shopping season by increasing stocks of new models.
With global demand for smartphones slowing due to the virus, some parts makers want to carefully assess Apple’s production prospects.
A display purchasing manager said, “Apple may want to adjust inventory so that we have sufficient inventory in the fall and Christmas. “
Apple is expected to produce around 200 million iPhones this year, about 10% less than its previous estimate of nearly 220 million phones before the coronavirus outbreak.
Although Apple will place formal orders with suppliers in May and June, the company has revised its outlook in the past. The same could happen if the pandemic continues. Apple announced in mid-February that it will temporarily limit supply of iPhones due to the epidemic and will not meet its sales forecast for the quarter from January to March.
The company’s supply chain is highly dependent on China, and operating rates in assembly plants run by Taiwan’s Hon Hai Precision Industry and others in China remained slow until March.
As Apple’s supply chain disruption in China 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 seems to prioritize stocks.
According to a think tank affiliated with the Chinese government, sales of smartphones in March in China fell to 21.02 million units, a decrease of 21.9% over the year.
Large Chinese online retailers appear to be selling iPhones at reduced prices, and it is unclear whether Apple’s sales forecast will hold. A slowdown in sales in the United States and in Europe, where the coronavirus is still spreading, is also expected.
In an April 10 report, Mizuho Securities lowered its estimate of iPhone 2020 production to 198 million units from 205 million units. The report highlighted the risks, including declining demand in Japan, the United States and Europe due to the virus.
As the epidemic continues, Asian smartphone makers “are also starting to cut back on parts purchases,” said an executive at a large semiconductor manufacturer.
In addition to the expected drop in demand, mainly in the United States and Europe, supply chain disruption continues, with Samsung Electronics in South Korea and Oppo in China suspending operations at their smartphone factories in India.