Apple Halts iPhone XR Supply Over Weak Demand

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According to a report by Nikkei Asian Review, the Cupertino, California based company has asked its top smartphone assemblers- Foxconn and Pegatron- to halt the production lines dedicated to the low-priced iPhone.

The report goes on to cite that Pegatron - Apple's second-largest iPhone assembly partner, also headquartered in Taiwan - faces a similar situation, where it's been instructed to suspend plans for ramping-up iPhone XR production pending further instructions from Apple, the same supply-chain source noted.

Apple shares sank as much as 4.5% Monday following a report that the tech giant has scaled back production orders for its new entry-level iPhone XR model. The company is a key assembler for iPhone XR, and it has also secured orders for iPhone XS Max, added the sources. The phone starts at $749.

Interestingly, the iPhone 8 and iPhone 8 Plus have had orders increase by more than 5 million units. A low price tag should mean that iPhone XR should be one of the company's best selling iPhone models this year. Apple is widely considered to be Foxconn's biggest customer, but other stocks of its suppliers were hit worse.

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Shares of Apple's suppliers across Asia were hit on Tuesday after the company suggested it would miss earnings targets. However, it is now using only around 45 lines and does not require any additional production capacity.

With regards to the growing uncertainty caused by the US-China trade disputes, Tung said Pegatron, being a technology company with global deployments, does not see it necessary to relocate its production capacity completely out of China, noting that a 3% capacity relocation might be sufficient. According to Nikkei, this means that Foxconn will be producing almost 100,000 units less every day based on the new forecasts available.

The report, in Nikkei, states that demand for the iPhone XR has been "disappointing".

It retains the key advances of the first iPhone X - facial recognition and an edge-to-edge display - but is cheaper while being noticeably larger at 6.1 inches.

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