Barclays has reported that a major Taiwanese supplier of Apple's (AAPL, Financial) key semiconductor components for iPhones could see a cut of around 3 million units in orders for the quarter ending in December, indicating weak demand. Additionally, the global delivery time for the iPhone 16 has shortened, further suggesting a lack of robust demand. The delayed release of the Apple Intelligence in China and Europe also affects early enthusiasm for the new device.
There is a divergence of opinion on Wall Street regarding the demand for Apple's new generation iPhones. Some analysts are optimistic about the new AI features provided by Apple's AI system, Apple Intelligence, which could potentially drive an upgrade cycle. However, others, like those at Barclays, have expressed concerns about weakening demand. Barclays analysts Tim Long and George Wang noted in their report that the supply chain investigation revealed that due to lower-than-expected demand, Apple might reduce iPhone 16 production for the quarter ending in December, leading suppliers to slash orders significantly.
According to the report, the significant order cuts for key components from a top Taiwanese supplier highlight weak demand. The reduced global delivery times for the iPhone 16 also suggest a lackluster demand. The analysts believe that if confirmed, these cuts would mark the earliest order reduction in recent cycles, as Apple typically adjusts orders at the beginning or middle of October.
The report concludes that the iPhone 16's initial sales were weak, partly due to the Apple Intelligence feature's delay in reaching the Chinese and European markets. The limited availability of AI features until 2025 is expected to dampen early interest in these critical markets.
Following Barclays' report, Apple's stock, which had surged 10.6% in the third quarter, saw a sharp decline. On October 1st, Apple shares fell about 1.5% at the start of trading, with early trading losses exceeding 3%, and briefly plummeting nearly 4%. This decline wiped out the gains from the previous day, bringing the stock back to the levels last seen on July 16th.
Barclays maintained its underweight rating for Apple and lowered its target price to $186, one of the lowest target prices currently set by analysts, down approximately 20.2% from their prior target of $233, suggesting a potential 20% decline from the closing price on Monday.
The same day, Citi also lowered its iPhone sales forecasts for the September and December quarters but raised expectations for the quarters ending in March and June 2025. Citi believes that with the US release of Apple Intelligence in late October and a major Siri update next year, there will be a surge in iPhone upgrades with the introduction of iPhone 17 in 2025. Consumers might be holding off on upgrades, waiting to see how Apple Intelligence impacts their daily phone interactions.
Earlier reports from Morgan Stanley and JPMorgan had helped Apple shares rise earlier in the week. Morgan Stanley analysts noted that the delivery times for the iPhone 16 Pro and Pro Max models were stabilizing, which was a positive development. JPMorgan analysts suggested that iPhone demand trends were improving.
