Boost iPhone production, Apple tells suppliers, despite concerns

Apple has reportedly told several suppliers that it plans to boost iPhone production over last year’s levels, despite fears that the economic fallout of the coronavirus crisis could significantly dampen demand.

Analysts had widely predicted a ‘supercycle’ of around 220M iPhone sales this year when the company launches its first 5G models, but with a global recession now expected due to coronavirus lockdowns, and record unemployment in the US and other countries, that idea has been thrown into doubt …

However, a Nikkei Asian Review report says that Apple wants to make plenty of iPhones even if it can’t sell them all this year, as it fears component shortages may limit production capacity later.

Apple has notified several of its suppliers that it plans to make about 213 million iPhones in the 12 months through March 2021, up 4% from the same period a year ago, […] Nikkei has learned.

Apple has shuttered most of stores around the world since mid-March as the novel coronavirus pandemic continues. But the company is expected to build up inventories of its new 5G phones due to concerns over possible component shortages, despite the possibility of falling global demand […]

Production of current and new models, including the SE and upcoming 5G iPhones, will be split nearly 50-50, sources said.

That’s higher than analysts’ revised estimates of around 200M sales. For that reason, some suppliers are skeptical, believing that the company may cut orders later in the year.

“Apple’s production outlook is pretty bullish, and we will need to assess whether it is based on a realistic demand [forecast],” said one executive at a components maker. “Actual production could be 10% to 20% lower,” he said […]

With global smartphone demand likely to slow due to the virus, some parts makers want to gauge Apple’s production outlook cautiously.

A display procurement manager said: “Apple may want to adjust inventories so that they have sufficient stocks in the fall and on Christmas” […]

Although Apple will place official orders to its suppliers in May and June, the company has revised its outlook in the past. It may do the same if the pandemic continues. Apple announced in mid-February that it would temporarily limit the supply of iPhones due to the outbreak and would not meet its sales forecast for the January to March quarter.

However, as a cash-rich company, it may make sense for Apple to boost iPhone production to safeguard supplies, even if that means stockpiling products for later sale.

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