Apple Inc. (AAPL) To Cut iPhone 6S Production By 30 Percent As Sales Lag

Suppliers for the iPhone are bracing for another slowdown. Apple is expected to cut back production of its latest iPhone 6s and 6s Plus by up to 30 percent during the first quarter of this year, according to Nikkei Asian Review.

The iPhone maker had originally told its vendors to keep their production line output on par with the numbers it saw with the iPhone 6 and 6 Plus last year. But it may have overestimated the demand for its latest handset this time around, leaving excess supply of iPhones throughout its supply chain. The scaled back production is expected to help retailers and dealer partners whittle down their inventory.

In the meantime, Apple vendors such as Japan Display, Sharp, LG Display and Sony are expected to see a drop in shipments as a result of the slowdown. However, manufacturing output is expected to return to normal levels during the second quarter.

Apple’s iPhone accounted for well over half of its revenue in the 2015 fiscal year. But going into 2016, there’s strong concern from analysts that it may see shipments of its smartphone decline for the first time ever on a year-on-year basis, according to a research note issued by Morgan Stanley analyst Katy Huberty.

The concern of slowing smartphone sales have not only concerned Apple but the smartphone industry as a whole. For 2015, global smartphone shipments are expected to slow to 9.8 percent for a total of 1.43 billion units, down from 27.6 percent growth in 2014.

To make up for that potential shortfall, Apple is expected to place an increased focus this year on service revenue. It already started in that area of its business with the rollout of the Apple Pay mobile payment system to China, its iPhone Upgrade Program and the launch of its Apple Music subscription streaming service.