With reports that Apple (AAPL) was cutting orders for iPhone screens and other
parts because of sagging demand, its shares Monday dipped briefly below $500
for the first time in nearly a year.
Analysts, meanwhile, debated whether the sell-off was an overreaction by
investors or another sign of the erosion of Apple's once-dominant share in the
global smartphone market.
Japan's Nikkei newswire reported that Apple began to sharply cut back on
its orders of liquid crystal displays about a month ago from suppliers like
Japan Display and Sharp.
The news, also reported by The Wall Street Journal, which quoted "people familiar
with the situation," comes as hard-charging rivals like Samsung Electronics,
which makes phones based on Google's (GOOG) popular Android software, continue
to expand market share globally.
"Apple has had a phenomenal run, but this news is not a surprise at all,"
said analyst Joel Achramowicz with Merriman Capital. "I wouldn't expect Apple
to indefinitely see the same sort of revenue growth it once enjoyed. Apple
once had extraordinary power over the supply chain, but we're now seeing more
equilibrium, which is a
good thing for the economy and for consumers."
Other analysts, though, were skeptical of the press reports, particularly
The Wall Street Journal's claim that the pullback in orders was "due to weak
demand." According to the Japanese report, Apple has asked three of its
suppliers in Japan and South Korea to cut almost in half its supplies of LCD
panels from an initial plan for about 65 million screens in January-March.
Charles Wolf, an analyst with Needham & Co., said that while he doesn't
know the precise reason for Apple's decision, he thinks the dramatic shift
could instead be the result of a better-than-expected supply-chain performance
by Apple's vendors. Wolf said suppliers initially had problems with the
technology used in the new screens for the iPhone 5, but as time passed, they
figured things out and were able to produce more of the panels faster. Apple,
he said, may simply have over-ordered screens and is now cutting back to
adjust.
"There initially was limited availability of the iPhone 5 because of the
difficulty vendors were having building those new screens," he said. "They
could have been getting, say, only 20 good ones out of 100 attempts. But once
yields started to rise, they were maybe getting 80, so maybe Apple had
originally ordered a number on the assumption they wouldn't improve the
process as much as they did."
Wolf said the supply-demand picture should become a lot more clear next
week when Apple announces its first fiscal quarter results. Investors have
been jittery in anticipation. Apple set a blistering pace of revenue and
earnings growth in recent years, eventually becoming the world's most valuable
company in terms of market capitalization. But after peaking last fall, its
share price has slumped steadily as growth slowed and its smartphone rivals
caught up with and then passed the tech giant in sales.
Samsung, in particular, has given Apple a run for its money. The South
Korean electronics maker said Monday that sales of its flagship Galaxy S
smartphone had passed 100 million since the first model was launched in May
2010. The Galaxy S3, launched last May, sold more than 40 million in seven
months.
Samsung is expected to increase its smartphone sales by more than a third
this year, and widen its lead over Apple, according to researcher Strategy
Analytics, which has forecast Samsung will sell 290 million smartphones in
2013 versus iPhone sales of 180 million.
After dropping 4 percent shortly after the market opened Monday, briefly
falling below $500, Apple shares edged up a bit, ending the day at $501.75, a
decline of 3.6 percent for the day.
