TAIPEI – Apple is reducing its planned production of the iPhone 12 mini for the first half of this year as part of a broader adjustment to the production plans it formulated last year, Nikkei Asia learns.
The U.S. tech giant is slashing orders for all iPhones by about 20% compared to December’s plans, according to sources familiar with the matter, with most coming from the mini, its cheapest 5G-enabled phone. Late last year, Apple asked suppliers to guarantee components and parts for up to 96 million devices, including the entire iPhone 12 series – its first 5G-enabled line – for the first six months of 2021. The total also included the Older iPhone 11 and iPhone SE models.
At one point, Apple even told some vendors that it needed components for more than 100 million iPhones in the first half of the year in an attempt to secure components and production capacity amid global shortages.
The company now aims to produce about 75 million units – slightly more than sales of the iPhone in the same period last year. The company told suppliers that it still intends to build 230 million iPhones by 2021, an increase of more than 11% over last year, the sources said.
The biggest overhaul is for components and parts for the 5.4-inch mini iPhone 12, several sources said, which sells for around $ 699. Some suppliers have even been asked to temporarily stop building components specifically for the mini , a source told Nikkei. The blandest estimate is that Apple will cut its planned production by more than 70% in the six months to June.
“This year is still not bad, but it is clear that the demand for the first half of 2021 is not as high as people thought at the end of last year,” someone else told Nikkei.
The adjustment of production levels for the iPhone 12, iPhone 12 Pro and Pro Max has been comparatively moderate and the demand for these models remains relatively healthy, several people said.
“Some of the mini’s components and parts have been relocated to the iPhone 12 Pro and iPhone 12 Pro Max,” said another person with direct knowledge of the subject.
Sources added that the downward revision also reflects a correction of Apple’s previous aggressive reserve of components and parts at a time when manufacturers of smartphones, PCs, servers, automobiles and others were preparing to fight for limited supplies of chips, cards, printed circuit, monitors and other resources.
Jeff Pu, a veteran smartphone analyst at GF Securities, told Nikkei that Apple had misjudged the demand for both the iPhone 12 Pro and the iPhone 12 mini.
“Consumers won’t have that very strong feeling about the differences between the central processors and the performance of 5G wireless communication right away, but they can immediately see the difference in the screen size,” said Pu. “If the price is more or less the same, many consumers prefer to choose the old iPhone 11, which has a bigger screen, since they still don’t expect much from the 5G”.
Another problem with the iPhone 12 mini is the battery, an analyst at Isaiah Research told Nikkei Asia. “The battery of the iPhone 12 mini is much smaller than the old iPhone 11, which has almost the same price, and is smaller than the battery of the iPhone 12, which is only $ 100 more expensive. … A 5G phone generally consumes more energy, so consumers will be reluctant to buy a phone that, comparatively, does not have a good battery. “
Sources told Nikkei that, at the end of last year, about 10% to 15% of Apple’s orders for the iPhone 12 series were allocated to the mini.
The change in production plans poses a major challenge for Apple suppliers, who will be forced to quickly adjust their production utilization rates and work resources, especially those that supply parts for the iPhone 12 mini.
Meanwhile, Apple itself is still enjoying healthy demand for its premium models. In addition, demand for the iPhone 11, launched in the fall of 2019, remains robust in emerging markets like India.
Apple sold 74.3 million iPhones in the period from January to June last year, according to research firm IDC. The revised production plan of around 75 million units still represents a slight growth compared to last year, although the plans are subject to change in response to market dynamics.
Apple still maintains a forecast for the entire year to produce about 230 million iPhones, which would represent an 11.6% increase over last year. Sources say this is to maintain flexibility in the event of any component shortages and to respond to further economic recovery in the second half of 2021. Last year, Apple sold 206 million iPhones, of which 90.1 million were shipped in the October-December quarter, IDC data showed. Apple shipments increased 7.9% in 2020, despite the 5.9% drop in the global smartphone market.
In the meantime, Apple has rescheduled plans to begin mass production of two new MacBook laptops in the second half of the year, from the previous May or June schedule, Nikkei learns. The two MacBooks will be powered by the Apple Silicon processor as part of a two-year transition from microprocessors from longtime vendor Intel.
Although Apple has adjusted its iPhone production plans, the global shortage of chips and components that emerged last year has weakened its bargaining power, the sources said. The company has allowed companies with particularly tight supplies to maintain price levels, rather than asking for aggressive discounts every quarter, as it has done in recent years, they said.
Apple’s CFO, Luca Maestri, told investors in January that the company was facing some supply restrictions, but estimated that supply and demand for the iPhone would reach a balance during the March quarter.
Apple declined to comment on this story.