TAIPEI – Apple is cutting planned production of the iPhone 12 mini for the first half of this year as part of a broader adjustment to its output plans it formulated late last year, Nikkei Asia has learned.
The US tech giant is cutting orders for all iPhones by about 20% compared to its December plans, according to sources familiar with the case, with the majority coming from the mini, the cheapest phone with 5G support. Late last year, Apple told suppliers to secure components and parts for up to 96 million handsets, including the entire iPhone 12 series – the first 5G-compatible lineup – for the first six months of 2021. The total also included the older iPhone 11 and the iPhone SE models.
At one point, Apple even told some suppliers that it needed components for more than 100 million iPhones in the first half of the year to secure components and manufacturing capacity amid global shortages.
The company is now targeting production of approximately 75 million units – slightly more than iPhone shipments in the same period last year. The company told suppliers it still plans to build 230 million iPhones by 2021, an increase of more than 11% from last year, sources said.
The biggest revision involves components and parts for the 5.4-inch iPhone 12 mini, multiple sources said, which retails for around $ 699. Some vendors were even asked to temporarily stop building components specifically for the mini, a source told Nikkei. The mildest estimate was that Apple will cut planned production by more than 70% for the six months to June.
“This year is still not bad, but of course the demand for the first half of 2021 is not as high as was thought at the end of last year,” another person told Nikkei.
The production level adjustment for the iPhone 12, iPhone 12 Pro and Pro Max has been relatively mild, and demand for those models remains relatively healthy, several people said.
“Some components and parts for the mini have been reassigned to the iPhone 12 Pro and iPhone 12 Pro Max,” said another person with direct knowledge of the matter.
Sources added that the downward revision also reflects a correction to Apple’s earlier aggressive booking of components and parts at a time when makers of smartphones, PCs, servers, cars and more were gearing up to fight for a limited supply of chips, circuit boards, displays and other sources.
Jeff Pu, a veteran smartphone analyst at GF Securities, told Nikkei that Apple misjudged demand for both the iPhone 12 Pro and the iPhone 12 mini.
“Consumers will not immediately have such a strong sense of the differences between core processors and 5G wireless communication performance, but they can immediately see the difference in screen size,” said Pu. “If it’s about the same price, many consumers prefer the older iPhone 11, which has a larger screen, because they don’t expect much from 5G yet.”
Another problem for 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 that of the older iPhone 11, which is about the same price, and smaller than the battery of the iPhone 12, which is only $ 100 more expensive. … A 5G phone consumes generally more power, so consumers will be reluctant to buy a phone that, in comparison, 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 had been allocated to the mini.
The change in production plans poses a major challenge to Apple suppliers, who will be forced to quickly adjust their production usage and workforce, especially those who mainly supply parts for the iPhone 12 mini.
Apple itself, meanwhile, is still enjoying healthy demand for its premium models. Demand for the iPhone 11, first launched in the fall of 2019, also remains robust in emerging markets such as India.
According to research firm IDC, Apple shipped 74.3 million iPhones in the period January-June last year. The revised production plan of approximately 75 million units still represents slight growth from last year, although plans are subject to change in response to market dynamics.
Apple still maintains its full-year outlook to produce approximately 230 million iPhones, which would be an 11.6% increase from last year. Sources say this is to maintain flexibility in the event of 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 quarter. December, IDC data showed. Apple shipments were up 7.9% in 2020, despite a 5.9% contraction in the global smartphone market.
Meanwhile, Apple has backed off plans to mass produce two new MacBook laptops in the second half of the year, from the previous May or June schedule, Nikkei has learned. The two MacBooks will be powered by the Apple Silicon processor as part of a two-year transition away from the old vendor Intel’s microprocessors.
Although Apple has adjusted its iPhone manufacturing plans, the global shortage of chips and components that arose last year has weakened its bargaining power, sources said. The company has allowed companies with particularly tight inventories to maintain the price level, rather than asking for aggressive discounts every quarter, as it has done in recent years, they said.
Luca Maestri, Apple’s CFO, told investors in January that the company was facing supply constraints, but expected the iPhone’s supply and demand to balance in the March quarter.
Apple declined to comment on this story.