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Apple (AAPL) Component Cuts Related to Faster iPhone Refresh?

January 14, 2013 1:24 PM EST Send to a Friend
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Apple (NASDAQ: AAPL) remains under pressure following reports of iPhone 5 component order cuts throughout the supply chain. Despite some of these same concerns being discussed over the past month, Apple investors remain skittish and aren't taking any chances with earnings just nine days away.

Nikkei reported Apple cut its March quarter orders for iPhone 5 LCD screens by 50% from its original plan of 65 million. Apple also cut orders for other iPhone 5 components.

There are numerous explanations for the cut, with many suggesting the 65 million number was simply unrealistic and Apple was over-ordering to avoid any supply chain snafus. As one analyst notes, 65 million would imply a 41 percent sequential increase from a December forecast of 46 million. It should also be noted that Apple works with numerous suppliers, making it difficult to predict exactly what the demand picture is specifically looking at a few suppliers.

Another theory going around is that Apple could be preparing to speed up the iPhone product cycle, something mention by analysts at Goldman Sachs last week.

Currently the company has a 12-month product cycle for the iPhone. However, Apple refreshed its traditional iPad line just seven months after the third-generation iPad was launched. Something similar can be coming for the iPhone. Apple could be moving toward a more rapid 6-month refresh cycle on the iPhone in 2013, according to the analysts.

Apple could do this as it would give competitors like Samsung less room to capture share in the off-quarters before Apple's product refreshes. This would also potentially ease the violent quarterly swings in product demand normally seen in between product cycles and smooth quarterly unit shipments over time. Smoothing of demand would also help relieve the constraints often seen in Apple's supply chain and likely save the company money.

Today's component cuts specifically talked about iPhone 5 components. What if at the same time the company is cutting iPhone 5 components they are ramping iPhone 5s or iPhone 6 components?




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