Apple scaling back iPhone 4S due to iPhone 5 launch

Apple is cutting back on iPhone 4S production in run up to iPhone 5 launch, analyst

An analyst is claiming that Apple is cutting back on production of the iPhone in the run up to the launch of the iPhone 5.

In a note to investors, Sterne Agee analyst, Shaw Wu, said that his checks had shown that Apple is significantly cutting back on the production of the current iPhones.

He wrote: "From our understanding, the reason for the reduction is not demand related but rather due to the upcoming 6th generation iPhone refresh likely in the September-October timeframe. It appears that AAPL is opting to be conservative with its suppliers to factor in a potential 2-quarter pause ahead of the refresh and also to manage inventory. We believe this helps explain why its June quarter guidance was somewhat more conservative," according to BGR.

According to Wy, the number of iPhones produced may have fallen by 20 per cent to 25 per cent on a quarter-over-quarter basis. As a result, he has lowered his estimations of iPhone shipments to 26 million to 28 million units, below Wall Street's average estimate of 30 million to 31 million. He noted that the decline is not due to weaker demand for the product.

In contrast, Wu raised his iPad shipment expectations from 14 million to 15 million units, claiming that initial supply issues for the Retina display have been "greatly improved with an additional supplier".

Wu's price target for Apple is $780. Today the share price is $553.17.

We recently reported that the rumour of iPhone 5 will mean a poor Q3 for Apple. Apple's own guidance for the quarter was lower than expected. Morgan Stanley analyst Katy Huberty noted that Apple has only guided this far below expectations once since June 2009, and that was the September quarter of last year when it correctly predicted consumers would buy fewer iPhones as they waited for the next release.

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Karen Haslam

Macworld U.K.

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