Are Reports of iPhone Production Cuts Correct?

7:44 am, November 6th, 2008, Ed Sutherland

Is the meteoric rise in demand for Apple’s iPhone cooling off? BMO Capital is the latest to issue a projection of slower production of the handset for the first fiscal quarter of 2009.

BMO’s Keith Bachman Thursday reduced his estimate for first quarter iPhone sales to 5.6 million from 6.6 million. At the heart of the prediction is 2 million of the 6.9 million units sold in September went into inventory.The analyst said due to that “channel fill” it will be difficult for the December quarter to compare to the 6.9 million handsets sold in the quarter ended September 30.

The analyst said the December quarter will bring 5.6 million iPhones sold, down from 6.6 million previously projected. Still the number is expected to be a 15 percent increase in end-user sales over the 4.9 million sold in September.

Bachman also trimmed his projection for 2009, estimating Apple will sell 21.7 million iPhones during the fiscal year, down from 22.8 million he previously expected.

If 2009 looks bleaker than first anticipated, the analyst expects a brighter 2010, estimating sales will grow 20 percent to 26.2 million units, an increase over the 24.5 million iPhones initially predicted.

Wednesday, UBS said iPhone production could drop to around 6.7 million units for December, down from 9 million in the September quarter.

“We believe iPhone production and the associated supply chain may be experiencing some incremental weakness due to concerns about end demand,” analyst Maynard Um told investors.

On Monday, FBR’s Craig Berger kicked off the current speculation, suggesting Apple may have cut iPhone production by 40 percent.

Independent Apple analyst and blogger Andy Zaky told Cult of Mac caution is advised when digesting such predictions. In October, Fortune named Zaky among a small group of Apple bloggers that beat analysts when predicting last quarter’s iPhone sales figures.

“You get reports like this almost every quarter - that Apple has made some dramatic production cut across some product line. It never materializes into actually cut backs on sales,” Zaky said.

The blogger noted despite worries of a recession, iPod sales grew 8 percent over the last quarter and Apple sold 6.9 iPhones.

He said Apple has cut production previously. The blogger cited the September news that the company trimmed production for a couple weeks of the 8GB iPhone - prompting stories of the handset being “sold out” in stores. However, later that month, Apple ramped up production of the 8GB iPhone.

Zaky said he prefers to rely on IMEI data to make any conclusions on Apple production. The IMEI figures are part of a database by MacObserver forum readers that tracks iPhone serial numbers of iPhones built.

Posted by Ed Sutherland in Apple, News, Top stories, iPhone | Comment on this article