Reports suggest that weak demand has led Apple to halve orders for some iPhone 5 components for the current quarter.
The Wall Street Journal (WSJ) report cites "people familiar with the situation" and says: "Apple's orders for iPhone 5 screens for the January-March quarter, for example, have dropped to roughly half of what the company had previously planned to order."
Reuters also reports that Japanese daily newspaper, the Nikkei, said today that Apple has asked Japan Display, Sharp and LG Display to cut supply, down from an initial order of about 65 million units for the quarter. The suppliers will reportedly be lowering production this quarter by between 40% and 80%, compared to the October-to-December quarter.
The WSJ report states: "The move indicates that sales of the new iPhone haven't been as strong as previously anticipated and demand may be waning. It comes as the company has been facing greater challenges from Samsung Electronics and other makers of smartphones powered by Google's Android operating system."
The iPhone 5 topped five million sales over its launch weekend, beating the record set by the 4S, but falling short of analyst predictions. At the time, Apple issued a statement saying demand for the iPhone 5 has exceeded the initial supply. It was the first time Apple had ever said it had completely sold out of initial supplies of a new iPhone.
Apple is yet to offer any official comment on the latest reports. In December, Apple stock dropped on the back of reports from analysts that the company was cutting its iPhone 5 orders for Q1 2013. While it is par for the course for orders to be cut after the holiday season, analysts say these cuts are bigger than expected.
Jefferies analyst Peter Misek says iPhone orders were dropped to 25-30 million for the March quarter, down from the 35-40 million range. Also in December, Citigroup Apple analysts Glen Yeung, Walter Pritchard and Jim Suva all cut Apple's price target, and changed its rating from "buy" to "neutral", saying they were no longer convinced iPhone 5 sales would be strong enough to prop up the stock.
Meanwhile, South African consumers wanting to get their hands on the iPhone 5 have been left frustrated at what appears to be a local dearth beyond the usual supply and demand scenario.
Other forces
While the reports of the reduction in component orders inevitably draw speculation about demand for the iPhone 5, it has been noted that there may be other forces at play.
Offering alternative explanations for the cuts, Business Insider reported it is possible production of the iPhone 5 went better than expected after initial hiccups. Secondly, reports have also begun to suggest that Apple could be looking to release a new iPhone (most likely the iPhone 5S) around May-June this year.
Analyst at Topeka Capital, Brian White, said in early January that he anticipates Apple is going to change its strategy of only releasing one model of the iPhone at a time.
"We believe this is about to change, with the next iPhone offering different screen sizes that we believe will allow Apple to better bifurcate the market and expand its reach."
White also added that the next iPhone iteration will come out in May-June and could be available in a variety of colours - similar to the latest iPod Touch model.
Misek has predicted that the iPhone 5S will come in six to eight colours, and will have a new super HD camera/screen, NFC and improved battery. Misek also suggests Apple will be shifted to a mid-year release for the new handset (the iPhone 4S and 5 were both announced in the September/October time frame).
Uncomfortable
Meanwhile, Apple is due to announce its official results for the fourth quarter of 2012 on 23 January. According to a summary of analyst predictions by Fortune, on average, it is expected that Apple will have sold about 49.5 million iPhones.
Asymco analyst, Horace Dediu, says given a number of unique challenges faced in the fourth quarter, he is "very uncomfortable" with his own forecast for Apple.
"I considered not publishing one at all, because it gives too much confidence when none is warranted," says Dediu. He estimates that Apple will have sold 55.5 million iPhones, 24.4 million iPads, and total revenue will be about $60 billion.
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