Please ensure Javascript is enabled for purposes of website accessibility

More Evidence That iPhone X Demand Is Underwhelming

By Evan Niu, CFA - Feb 20, 2018 at 2:31PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

OLED display supplier Samsung is reportedly cutting production.

Concerns have mounted in recent months that Apple's (AAPL -1.80%) iPhone X may be suffering from weak demand. Even beyond media reports and rumors, Apple's own fiscal first-quarter earnings release contained clues suggesting as much, the most notable being the fact that Apple reached supply-demand balance for iPhone X in December -- just over a month after the $999 flagship phone was released.

There's a fresh media report this morning again suggesting that iPhone X demand remains underwhelming.

Corner of iPhone X display

Samsung is reportedly cutting OLED panel production for Apple orders. Image source: Apple.

Last but not least

The Nikkei Asian Review is reporting that Samsung is reducing production of OLED panels that were originally destined for the iPhone X. The South Korean conglomerate had initially been planning on supplying 45 million to 50 million displays for Apple from one of its manufacturing facilities in the first quarter, but this output target has been cut all the way down to 20 million units. Samsung's second-quarter production target is still up in the air, and it could likewise be cut.

The plant that pumps put display panels for Apple could see its output fall by over half, according to the report, and Samsung is trying to grab orders from other manufacturers to compensate for the shortfall. Samsung had invested nearly $13 billion in capital expenditures last year, predicated on strong demand for Apple's latest and greatest handset.

Apple's official results and guidance matter more

Generally speaking, investors shouldn't put too much weight in these types of supply chain reports. Apple's supply chain has countless moving parts, and CEO Tim Cook has previously cautioned investors from paying too much attention to this type of speculation. Here's how he responded to one such report on an earnings call way back in 2013 (emphasis added):

I would suggest it's good to question the accuracy of any kind of rumor about build plans and also stress that even if a particular data point were factual it would be impossible to accurately interpret the data point as to what it meant for our overall business because the supply chain is very complex and we obviously have multiple sources for things, yields might vary, supply performance can vary. The beginning inventory positions can vary, I mean there is just a long list of things that would make any single data point not a great proxy for what's going on.

That being said, the reports keep coming in and investors can't ignore Apple's own results and guidance. iPhone unit sales were worse than expected last quarter, and the Mac maker's guidance for the March quarter left a bit to be desired as well. Guidance for the fiscal second quarter calls for revenue of $60 billion to $62 billion. Analyst estimates have been coming down in recent weeks and the consensus estimate is now $61.4 billion in sales, down from $65.4 billion when Apple reported.

Keep in mind that the Chinese New Year is an important holiday shopping event in the world's biggest smartphone market and takes place during the March quarter. The iPhone X's lofty price tag may simply be out of reach for many consumers.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$136.72 (-1.80%) $-2.51

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.