Apple May Slash iPhone Production: JPMorgan

Apple Inc.'s (AAPL) shares may have recovered from last month's sell-off following its most recent quarterly report, but one team of analysts cautions on lower-than-expected iPhone production from the tech giant in the upcoming period. 

Apple shares closed up about 0.4% on Monday at $176.82, reflecting a 4.5% gain year-to-date (YTD) versus the S&P 500's 1.8% increase over the same period. After the firm's Q1 report, Apple investors feared slowing demand for its smartphones, including its 10th anniversary iPhone X and new iPhone 8 and 8 Plus models.

In the first quarter of 2018, Apple’s fiscal Q2, analysts with JPMorgan's Asia-based Apple supply-chain team expect iPhone X production to drop to 15 million units, representing a 25% reduction from their previous estimate. In the following quarter, analysts expect another 44% decline to 10 million units. The analysts foresee overall iPhone production falling to 52 million units in the first quarter and 42 million in the second quarter, reducing their outlook by 3 million units for both periods. 

Declining Market Share in Asia

Some of the decline can be attributed to the Silicon Valley company's recent struggles in Asia, where shoppers are increasingly opting for cheaper smartphones from rivals such as Xiaomi Corp, Oppo Electronics and Vivo. According to a recent report in The Wall Street Journal, Apple's market share is declining or stagnant at best in some of the world's largest markets, where typical smartphones sell for under $200.

While Apple's high-priced phones helped boost sales in Asia-Pacific by 11% last quarter, the new benchmark has failed to attract the mass market and may hurt the company in the long term as its local competitors gain popularity. In China, Apple's market share has fallen from 13% in 2015 to just 8%, while in India the firm has failed to grow its 2% share since 2013, according to research firm Canalys and as reported by the WSJ. By comparison, China's Xiaomi has grabbed nearly 20% of the market in India, up from just 3% in 2015. 

On Monday, analysts at Piper Jaffray offered a bullish outlook on AAPL's new lineup of phones for the year, in which the firm should offer cheaper and larger models. Highlighting a survey which indicated that consumers are not upgrading due to price and size, the analysts expect a "super long" cycle to be driven by a "wider array of X-gen devices." (See also: Apple to Launch Own Employee Health Initiative.)