Cutting corners: iPhone manufacturers are not able to make full use of their production capabilities and are closing down unneeded assembly lines. Weakened demand for smartphones globally might not hurt Apple's revenue too much, but suppliers could feel the strain.
Word has been sent from Apple to manufacturing partners Foxconn and Pegatron that additional capacity will not be required for producing the iPhone XR. This news arrives shortly after Apple has decided to stop sharing units sales on individual product lines.
Wistron, one of Apple's lesser known iPhone assemblers, was reportedly asked to remain on standby for production of the iPhone XR earlier in the year, but will not be receiving any orders to produce more iPhones.
Foxconn initially built out 60 assembly lines for the iPhone XR, expecting extremely high demand for the unit. Currently, only around 45 of the lines are being used with no sign of the last quarter being needed. According to Nikkei, this means that Foxconn will be producing nearly 100,000 units less every day based on the new forecasts available.
Pegatron is believed to be in a similar situation where demand is not reaching the capacity of their assembly lines. The company is currently awaiting an update from Apple before deciding what to do with unused assets.
Interestingly, the iPhone 8 and iPhone 8 Plus have had orders increase by more than 5 million units. Originally Apple had ordered 20 million of the last generation model but has since raised the order to 25 million.
Apple has made it clear that iPhone sales this holiday season are going to miss the expectations of some investors. However, Cupertino is certainly not in a rough spot and continues to post extremely strong revenue figures. Apple will continue to evaluate demand on a weekly basis so that manufacturing partners are able to appropriately adjust for any changes.