Apple Inc. has told its smartphone assemblers Foxconn and Pegatron to halt plans for additional production lines dedicated to its new iPhone XR, the Nikkei financial daily reported on Monday.
Apple shares fell nearly 4 per cent after the report, which fuelled concerns that the iPhone XR, the cheapest of three iPhones Apple unveiled in September, was facing weak demand just days after it hit shelves.
The Nikkei, citing supply chain sources, said Apple had also asked smaller iPhone assembler Wistron to stand by for rush orders, but that the company will receive no orders for the iPhone XR this season.
“For the Foxconn side, it first prepared nearly 60 assembly lines for Apple’s XR model, but recently uses only around 45 production lines as its top customer said it does not need to manufacture that many by now,” the Nikkei quoted one source as saying.
Apple is considered the biggest customer for Foxconn, formally known as Hon Hai Precision Industry Co.
Apple did not respond to Reuters’ request for comment, while Foxconn and Pegatron each said they would not comment on specific customers or products.
The Nikkei’s report comes days after Cupertino, California-based Apple warned that sales for the crucial holiday quarter would likely miss Wall Street expectations.
“If the reports are accurate, we do find it somewhat disturbing that this would take place so early after the launch of the iPhone XR,” said Angelo Zino, an analyst at CFRA.
“We did not witness any notable order pushouts for the iPhone XR after the initial week of its launch, which is the first time we can say that about a new phone release that took place in the fall,” Zino added.
The decline in Apple’s stock was “way overdone and undeserved,” said Tigress Financial Partners analyst Ivan Feinseth.
“History has shown all kinds of statements made about Apple supply chain and the endless predictions of slowing of iPhone and other Apple product sales have been wrong,” said Feinseth, who rates Apple’s stock a “strong buy.”
The Nikkei reported in June that Apple expected to ship about 20 per cent fewer iPhones this year compared with the same time last year.
In 2016, Apple introduced a cheaper iPhone called the SE, at a starting price of $399, but failed to lure more customers to buy that product.
Separately, Apple’s stock was downgraded for a second time since its earnings report, this time by Rosenblatt Securities, which said it has lowered its expectations for iPhone production and shipments, CNBC reported on Monday.