Questionable iPhone production cutback reports are back

TD Cowen says Apple has cut its iPhone orders as all smartphone manufacturers face lower demand in China for the first calendar quarter of 2024, but it's ignoring Apple's typical January adjustments.

TD Cowen most recently estimated that Apple lost over $30 billion because of issues to do with iPhone 14 production delays and ongoing power restrictions in China. Now it's saying that supply chain sources indicate an overall drop in consumer demand for smartphones in the country.

"Our industry field work indicates Mar '24 Q supply chain cuts for iPhone, Huawei, and Honor that could be related to softer near-term China demand," says the report seen by AppleInsider. "China smartphone shipments were strong in Oct & Nov '23 based on CAICT data, but anecdotally trends may have weakened starting in Dec."

For Apple in particular, TD Cowen believes that for C1Q24, Apple has cut orders from 52 million iPhones to 48 million. "Most of these cuts come from the standard 6.1" display size models," the core iPhone 15.

TD Cowen also reports that Samsung has cut orders from 62 million to 58 million, and says that this includes an assumption that the firm will launch its Galaxy S24 in March 2024.

Overall, though, the investment bank does expect to see improvements for the whole market. "With the smartphone market -6% in CY23 we revise our CY24 forecast to +4% Y/Y from +5% given tempered C1H24 trends," it says. "We also model CY25 market shipments +4%."

"Smartphone demand was soft for much of 2023 due to the macro while the supply chain worked to reduce channel inventory," continues TD Cowen. "We believe the market saw improved demand late in C3Q23 and early parts of C4Q23."

"We believe this was driven by the China market starting in the month of September," it says, "along with anecdotes of better emerging markets demand (e.g., South America and Southeast Asia)."

However, Apple is regularly reported to have cut iPhone production orders at this time of year. While it could be related to lessening demand, it's typically the period when Apple is adjusting the mix of models being produced, in order to match consumer demand.

Consequently while TD Cowen's sources may be correct about demand in China, the specifics of the claim suggest that Apple is reducing production of the iPhone 15 in favor of the iPhone 15 Pro.

TD Cowen has not changed its predictions or recommendations for Apple stock.