Analysts push back against reports of weak iPhone 5 demand

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Analysts and industry observers moved to counter reports that a cutback in Apple's (NASDAQ:AAPL) orders for iPhone 5 components indicated a drop in demand for the device. The reports, first from Japan's Nikkei and then also from the Wall Street Journal, caused Apple's stock to drop 3.6 percent yesterday. 

In the aftermath of the reports, analysts said that the reports might not be accurate. "As far as we can tell, iPhone 5 demand remains robust," Sterne Agee analyst Shaw Wu wrote in a research note to clients, according to CNET. Similarly, Baird analyst William Power wrote that he was "actually raising our calendar fourth quarter iPhone forecast slightly," and that "most demand indicators remain favorable."

The reports said that Apple cut its orders for screens for the new gadget from suppliers like Sharp and LG by about half of what it had previously planned for the first quarter of 2013. Nikkei reported that Apple dropped its original target of 65 million screens to about half that, citing an unidentified senior executive at a component maker it didn't name.

Some analysts said in the aftermath of the reports that any decline in demand for the iPhone 5 so soon after its release last fall is a sign that Apple needs to expand its potential market and go after price-conscious consumers with a lower-cost model. Recent reports have indicated Apple is designing a low-cost iPhone.

Apple declined to comment, according to the New York Times.

Independent mobile analyst Tero Kuittinen noted in BGR that the iPhone 5 and the latest iPod touch both use the same screen. He wrote that the latest estimates for iPhone sales during the December quarter averaged around 52 million units and that perhaps the iPhone 5 portion of this may be anything from 30 to 40 million. In the first quarter, he wrote, Phone 5 unit sales might be 25 to 35 million units and that sales of the latest iPod touch could add another 4 million Retina display screens to Apple's orders.

"So if the most likely number of 4-inch screens Apple is reasonably expected to sell in March quarter is around 30 to 40 million units, why did Nikkei publish a report stating that Apple had halved its display orders for the quarter from 65 million units?" wrote Kuittinen, who is also vice president of Alekstra, a company that helps people manage wireless bills. "Nikkei was quite specific about the 65 million number. And it clearly tied it to iPhone 5 component orders, not total iPhone or iPhone 5 and iPod touch orders. In what world did Apple expect to order components for 65 million iPhone 5 handsets in the seasonally soft March quarter?"

Other analysts also rejected the reports' claims. NPD DisplaySearch analyst Paul Semenza told the NYT that Apple had expected to order 19 million displays for the iPhone 5 but cut the order to 11 million to 14 million displays. Semenza cited sources in Apple's supply chain for the figures.

"The reports claiming 65 million displays for next quarter make little sense; the reports that claim component orders have been 'halved' but without any specific numbers can't be verified three months from now when Apple reports its actual iPhone sales for the coming quarter," Daring Fireball blogger and Apple observer John Gruber wrote. "In the meantime, of course, Apple's stock took a beating today on these reports. If you don't smell stock manipulation here, I have a bridge to sell you."

Apple will report its earnings for the December quarter Jan. 23.

For more:
- see this CNET article
- see this NYT article
- see this BGR article
- see this Daring Fireball post

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