Apple shares dip on report of iPhone X production cut, wiping $17b from market value

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Apple will halve its iPhone X production target for the first three months of the year to around 20 million units, Nikkei has reported, sending the tech giant's shares down 1.6 per cent.

Without citing a source, the Japanese newspaper reported that slower-than-expected sales in the holiday shopping season in Europe, the United States and China had prompted Apple to make the cut.

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Wall Street slides as Apple drops

Bond sensitive utilites and telecom shares dragged Wall Street down from record levels Monday.

Earlier reports have suggested Apple would end production of the expensive phone — its first to feature an OLED screen — in 2018 rather than lowering its price for a second year as it usually does. Those reports indicated Apple intends to introduce three new phones this year, including two with OLED screens and a less expensive model, but Nikkei suggests the iPhone-maker may be reconsidering its investment in OLED.

The report added to growing concerns about weak sales of the expensive phone, making investors jittery about the company's financial outlook when it reports first-quarter results this week.

Apple's shares fell to their lowest level in 2018, knocking off $US14 billion ($17.29 billion) from the company's market value. The company declined to comment.

Analyst Toni Sacconaghi of Bernstein cut both his second-quarter and full-year forecasts for iPhones but said he did not expect Apple's 2018 profit to fall steeply because of changes to US tax law that will bring the company's rate down to 18 per cent.


"Apple earnings should handily beat December quarter expectations, but March guidance could moderately disappoint," UBS analysts said.

Nikkei also reports that the production cut — which it says likely came as inventory of the iPhone X stacked up and demand slowed — will have a "domino effect" on parts suppliers, with the impact running into billions of dollars in the first quarter of 2018 alone. Parts supplied for the iPhone X include OLED panels from Samsung, camera sensors from Sony, circuit boards from Murata and Kyocera and batteries from TDK.

The iPhone X was the first phone to sport a new design since the launch of the iPhone 6 in 2015 and many expected it to lead to blockbuster sales, dubbed by Wall Street analysts as a "supercycle."

"This was supposed to be the supercycle year and if Apple hasn't been able to drive substantial unit growth this year, then that makes you a little cautious on future iPhone cycles," Atlantic Equities analyst James Cordwell said.

Several analysts have lowered their estimates for iPhone X shipments in the past few weeks, citing the high price of the device and other factors, with at least three downgrading their rating on the stock.

Sacconaghi of Bernstein had originally predicted that Apple would outpace Wall Street expectations of 62 million iPhones by selling 66 million units, but this week he cut that figure to 53 million units, a nearly 20-per cent cut. He also cut his full year iPhone unit forecast 11 per cent to 220 million units.

But he only slightly revised his full-year earnings per share estimate for 2018 to $US11.80 from $US11.87, citing the positive effects of US tax law changes.

A survey of people planning to buy the iPhone showed that the percentage of them looking to buy the iPhone X has dropped to 37 per cent from 43 per cent in an earlier survey, UBS analysts wrote in a note this week.

Reuters, with Fairfax Media