(Adds share price, analysts' comments, details on smartphone
Jan 14 Shares in Apple Inc dipped below
$500 for the first time in almost one year after reports it is
slashing orders for screens and other components as intensifying
competition erodes demand for its latest iPhone.
Japan's Nikkei reported on Monday that the world's largest
technology corporation began sharply reducing buying of liquid
crystal displays about a month ago from suppliers like Japan
Display Inc and Sharp Corp.
The report, later matched by the Wall Street Journal, comes
as hard-charging rivals like Samsung Electronics,
which makes phones based on Google Inc's popular Android
software, continue to expand market share globally.
Apple stock slid more than 4 percent to an intraday low of
$498.51 -- a level not seen since Feb. 16, 2012 -- before
bouncing back to trade just above $500 at midday. The news also
hurt shares of suppliers such as Cirrus Logic Inc,
which dived 9 percent.
Some analysts argued that Apple and its manufacturing
partners had struggled with quality issues that might have
curtailed production times.
"Our checks with supply chain contacts close to the
situation identified a very different cause: a slower ramp in
the manufacturing of iPhones and iPads (reflecting some quality
control issues) and insufficient production lines," said Joane
Feeney of Longbow Research.
"Rather than ordering more components and having inventory
build up further, Apple put component suppliers on notice to
hold off, for the time being, on further shipments until it
expanded its production lines - which it plans to complete by
the end of the quarter."
By some estimates, the holiday quarter may have been the
worst for U.S. retailers since the 2008 financial crisis, with
sales growth far below expectations. Other data yields a more
mixed picture of holiday season demand.
Apple was not immediately available for comment. No one at
Sharp was immediately available to comment on Monday - a
national holiday in Japan - and parts suppliers to Apple in
Taiwan declined to comment.
Apple has asked Japan Display, Sharp and LG Display Co Ltd
to roughly halve supplies of LCD panels from an
initial plan for about 65 million screens in January-March, the
Nikkei cited people familiar with the situation as saying.
Japan Display's plant in southwest Japan, where Apple has
invested heavily, is expected to temporarily reduce output by up
to 80 percent from October-December levels, the Nikkei reported,
while Sharp's dedicated facility for iPhone 5 LCDs will trim
production in January-February by about 40 percent.
The move, if confirmed, would tally with analysts saying
that sales of the new iPhone 5, which was released in September,
have not been as strong as anticipated.
Apple has lost ground gradually to South Korean rival
Samsung, as well as smaller, fast-growing rivals such as China's
Huawei Technologies Co Ltd and ZTE Corp.
Samsung overtook Apple in 2012 to become the world's biggest
seller of smartphones, helped in part by the popularity of its
Galaxy Note II phone-cum-tablet and a vastly wider range of low-
to high-end devices that appeal to a broad swath of consumers.
Apple rolled out a single new smartphone last year.
Jefferies analyst Peter Misek trimmed his iPhone shipment
estimates for the January-March quarter on Dec. 14, saying that
the technology company had started cutting orders to suppliers
to balance excess inventory.
Apple also cut its orders for memory chips for its new
iPhone from its main supplier and competitor Samsung, Reuters
reported in September, quoting sources with direct knowledge of
The company has been cutting back its orders from Samsung as
it seeks to diversify its memory chip supply lines.
Samsung said on Monday that global sales of its flagship
Galaxy S smartphones had topped 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.
The Galaxy S IV is expected within months and may sport an
unbreakable screen, full high-definition quality resolution of
440 pixels per inch, and a more powerful processor.
It's expected to increase its smartphone sales by more than
a third this year and widen its lead over Apple, according to
researcher Strategy Analytics. It forecast Samsung will sell 290
million smartphones in 2013 versus iPhone sales of 180 million.
Kim Sung-in, an analyst at Kiwoom Securities in Seoul, sees
Samsung shipping 320 million smartphones this year and doubling
sales of its tablets to 32 million.
(Reporting by Tokyo bureau, Avik Das and Sayantani Ghosh in
Bangalore and Clare Jim in Taipei; Editing by Ian Geoghegan,
Supriya Kurane and Andrew Hay)