The number of iPhones produced this quarter may have fallen by 20 to 25 percent on a quarter-over-quarter basis, according to supplier checks by Sterne Agee analyst Shaw Wu. Wu thinks the reduction in orders is an indication that Apple is giving suppliers about two quarters to manage inventory and prepare for the new model, which he believes will come out around September or October.
“We believe this will enable Apple to be better equipped to meet strong demand and deliver upside relative to consensus expectations,” he said.
Wu adds that Apple still has 8.6 million iPhones in the channel inventory, allowing it to reach a supply-demand balance of between 4 and 6 weeks.
Apple had also reduced the production of the iPhone 4 ahead of the launch of the iPhone 4S. Wu said that Wall Street consensus last year “grossly underestimated the impact of a pause and inventory drawdown ahead of the iPhone 4S” and warns that investor expectations should be conservative for both the June as well as the September quarter.
Wu adds that he expects iPhone shipments in the quarter to be at 26 to 28 million units, below average analyst estimate of between 30 and 31 million, though the fall is because of Apple’s strategy, and not a drop in consumer demand.
However, the new iPad has continued to do well. Wu expects a slight increase in the production of the Apple tablet for the quarter. Apple had faced a few issues with limited components supply earlier, but production is back on track. Wu is raising his estimate for iPad shipments in the quarter to 15 million from 14 million units.