According to Nikkei News, Apple has informed its suppliers to reduce production of AirPods, Apple Watch and MacBook this quarter on the grounds of weakening demand, and the corporation believes that Apple's cutting of orders for the three major product lines will hit Lixin the hardest, with Quanta, Compal, Sunplus and other Taiwanese factories on alert.

This is the latest news of Apple cutting orders after the iPhone 14 series was rumored to have been scaled down by Apple due to poor sales of the entry model. According to the lawmaker, iPhone, AirPods, Apple Watch and MacBook are Apple's four most important hardware products. If all four product lines face the risk of being cut, it highlights that the global consumer product market is worse than expected.

One of Apple's suppliers told Nikkei News that since last quarter, Apple had notified that it would reduce orders for almost all of its production lines, one of the reasons being that demand was not strong; in addition, the epidemic prevention policy had made a major U-turn, leading to a surge in the new pneumonia epidemic, and the overall supply chain was still in the process of adjustment.

 

 

The technology industry initially welcomed the lifting of the epidemic prevention mechanism, but now has to face a new normal of a surge in infections. The head of a smartphone component manufacturer told Nikkei, "The new wave of the outbreak is spreading very fast, and most industry players are now finding that there is little point in quarantining employees."

Industry sources pointed out that among AirPods, Apple Watch and MacBook components, Taiwanese manufacturers play a relatively heavy role in MacBook components, while AirPods and Apple Watch are currently the main cooperating factories of mainland enterprises.

Among them, the majority of assembly orders for Apple Watch are taken by Lixun; for AirPods, previously handled by the main Goer acoustics, a while ago it was rumored that Apple asked Goer acoustics to suspend supply and transfer the order to Lixun.

As for MacBook, Quanta is the largest assembly plant. As a result of inventory adjustments, Quanta's notebook shipments last quarter were estimated to decrease by 15% to 20% quarterly, and this quarter is expected to enter the traditional off-season, with shipments expected to continue to correct.

Sunrex is the main supplier of MacBook keyboards. The first quarter is traditionally a slow quarter, and with fewer days of work during the Lunar New Year and labor shortages, overall revenue is expected to decline compared to the fourth quarter of last year.

 

Although Apple may reduce the supply chain orders, with the full development of non-IT business in recent years, Apple is expected to adjust the orders to have little impact on the performance of XMP with the gradual expansion of revenue contribution.

For "fruit chain" enterprises, "Apple dependence" is already a clichéd topic.

The same product multiple manufacturers OEM is Apple's usual routine, foundries compete with each other, giving Apple sufficient bargaining space.

The direct consequence of this situation is that it is becoming increasingly difficult for "fruit chain" companies to make money.

From 2016 to 2021, Goer's gross profit margin dropped from 22.39% to 14.13%, and Lixun Precision's gross profit margin also dropped from 21.5% to 12.28% in the same period.

For Goer and Lixun Precision, which are strongly bound to Apple, they are facing a dilemma: on the one hand, the market of electronic products continues to shrink, and the prices of labor and raw materials keep rising, plus Apple keeps pressing the price for its own profit, so it is more and more difficult to earn hard money for Apple's OEM; on the other hand, Apple is a big customer, and it cannot get rid of its influence in a short time.

In order to improve profitability, the foundry often has some problems in quality control. Once this balance is not well grasped, it will often cause a decline in quality control and yield rate. Apple's supply chain standards are extremely stringent, so Apple suppliers have been changing in recent years.