Early Monday morning two separate reports were published claiming that Apple had cut orders from iPhone parts suppliers in half, due to weaker-than-expected demand from consumers. Japan’s Nikkei said that orders had been placed initially anticipating sales of around 65 million iPhones for the company’s second fiscal quarter of 2013. A similar report regarding display manufacturers’ orders being halved was reported by the Wall Street Journal, but did not contain specific numbers. Some investors appear to be jarred by the report, and Apple stock briefly dipped below the mostly arbitrary $500 mark early Monday.
While a 50 percent cut in demand does sound big, it’s useful to keep things in perspective with regard to Apple’s normal seasonal iPhone selling trends for the second quarter. As Wells Fargo analyst and Apple watcher Maynard Um wrote in a note to clients Monday:
65 million is an awfully big number. We believe investors should not put too much merit in the 65 million estimate as (1) order cuts are not new news and (2) the likelihood that Apple would have shipped 65 million iPhone 5’s for the March quarter would have been miniscule, in our opinion, given the large implied sequential ramp into what is typically a seasonally slower quarter (and with less new carrier launches given the acceleration in the December quarter). 65 million would imply a 41% sequential increase based on our December forecast of 46 million.