Apple to keep iPhone production steady as market gets tougher

Apple Inc plans to keep iPhone production virtually flat in 2022, a conservative stance as the year becomes increasingly challenging for the smartphone industry.

The company is asking suppliers to assemble about 220 million iPhones, about the same as last year, according to people familiar with its projections, who asked not to be named because they aren’t public. Market forecasts have approached 240 million units, buoyed by a major update planned for the iPhone in the fall. But the mobile industry has had a rocky start to the year and production estimates are down across the board.

The worst inflation in decades, a war in the Ukraine, and a supply chain crisis threaten to hit sales in 2022. Strategy Analytics has forecast that overall smartphone shipments will contract as much as 2% in 2022, and TrendForce has downgraded twice your full grade. Annual production forecast in recent weeks. Analysts at IDC and Bloomberg Intelligence forecast around 240 million iPhones for this year at the beginning of the period.

The Cupertino, California-based company declined to comment on the outlook, which could change depending on the economy and supply constraints in the coming months. Apple doesn’t disclose its production goals and stopped disclosing how many iPhones it sells in 2019.

Its shares fell about 1% in premarket trading on Thursday.

Apple has already warned that supply issues will affect sales by between $4 billion and $8 billion in the current quarter, largely because Covid-19 lockdowns are affecting production lines in China. And the entire tech industry is bracing for a slowdown in consumer spending as rising fuel and material prices drive up the cost of everyday essentials.

The overall smartphone market had a rocky start to the year, with shipments falling 11% in the first quarter, the worst drop since the pandemic began two years ago. Xiaomi Corp, the world’s third-largest smartphone maker behind Apple and Samsung Electronics Co, posted its first quarterly revenue decline this month.

Apple is betting on resilient demand for its devices due to its comparatively richer customer base and the strength of its software and services ecosystem that drives hardware sales, according to the people. It’s also seeing less competition now that fierce rival Huawei Technologies Co. has been shut out of markets, they added. Huawei, once the number one phone maker by shipments, has seen its revenue fall for six straight quarters.

In addition, Apple hopes to entice consumers with an iPhone that breaks ground further than last year’s model. The next iPhone 14 phones, due out in the fall, are expected to offer new screen sizes and more new features like satellite text messaging. The iPhone 13, released last September, was considered a minor upgrade.

The company also just released an updated version of its lower-end iPhone SE that includes 5G, kicking off an upgrade cycle for more budget-conscious consumers.

Although lockdowns in China are poised to take a significant toll on Apple this quarter, the company hopes to ride out the turbulence, one of the people said. Foxconn Technology Group, Apple’s main iPhone maker, has been able to keep most of the facilities running. That includes its largest cluster of factories in the central Chinese city of Zhengzhou.

Smartphone demand typically declines in the second quarter, which may mean the impact of lockdowns won’t be as severe. Suppliers will try to make up any production shortfalls later in the year, when they hire more workers for the peak holiday season, provided China fully reopens and restores shipping lines.

“This year will be a tale of two halves,” Strategy Analytics senior director Linda Sui said in a note last month. “Geopolitical issues, component shortages, price inflation, exchange rate volatility and Covid disruption will continue to weigh on the smartphone market during the first half of 2022, before the situation improves in the second. half”.