Apple Inc. (NASDAQ:AAPL) Supply Chain Leaks Hint At Weaker Chip Orders For 2Q


It has emerged that Apple Inc. (NASDAQ:AAPL) has placed lower than usual orders for chips for 2Q2016. That can be taken to mean declining interest in Apple’s products, especially the cash cow that is the iPhone. It could also mean looming major changes in Apple’s chip design, although this looks remote.

Apple Inc. (NASDAQ:AAPL) hardly shares details of its supply chain. It also rarely steps in to set records straight when its supply chain details leak. But when it is claimed that the company is ordering fewer supplies for its 2Q2016 production, it can’t be far from the truth.

Apple’s troubles spilling into 2Q?

It was Apple’s management that warned in the last earnings call that 2016 will be initially slow in terms of iPhone sales. CEO, Tim Cook, specifically pointed out that the first three months of 2016 could see a steep decline in iPhone sales stemming from a range of unfavorable issues.

However, it seems those problems that Apple Inc. (NASDAQ:AAPL) foresaw are going to prolong beyond 1Q2016. It appears demand has remained low for iPhones heading into 2Q and Apple is scaling down its supply orders to apparently avoid dangerous buildup of unsold inventory.

For the April-June quarter, supply chain sources have leaked that Apple is ordering fewer chips than in the same period last year. Although one might argue that Apple is keeping its orders low for the quarter because it is planning major chip reboot, that reasoning doesn’t look strong enough.

Tepid interest in iPhone SE

What appears to be the case is that Apple Inc. (NASDAQ:AAPL) is facing continued slowing demand for iPhone 6S and iPhone 6S Plus. The weak chip orders for 2Q could also be indicative of low interest in the newly rebooted iPhone SE. Though reports have seemed positive for a device that has had low expectations. It is estimated that Apple could only ship between 4 and 5 million iPhone SE units in 2Q. The other thing that one sees through Apple’s soft orders for 2Q is tepid interest in the giant iPad Pro.

It is also reported that iPhone 6S and iPhone 6S Plus orders have declined to nearly half the levels of 1Q orders. Much of that is to be expected given sales tend to taper out further from release.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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