Apple is scaling back production of its new budget iPhone SE due to weaker-than-expected demand, Nikkei Asia reported Monday.
The company has reportedly asked suppliers to cut production of the iPhone SE, its new $429 budget 5G phone, by about 2 million units to 3 million units, or about 20% of the initial orders, according to Nikkei Asia. Apple also reduced orders for AirPods by about 10 million units for the entire year 2022, according to the report.
This production decrease is a sign of the Ukrainian war and inflation’s negative impact on electronics demand, Nikkei said.
The iPhone SE isn’t as popular as Apple’s more expensive iPhones. According to Counterpoint Research, the 2020 version of the iPhone SE accounted for 12% of all iPhone sales from its launch until Q4 2021.
Several major tech companies, including Apple, halted sales in Russia following its invasion of Ukraine. The U.S., EU, Japan, South Korea and Taiwan all imposed economic sanctions on Russia for the invasion, disrupting the supply chain and increasing inflation risks.
An Apple spokesperson wasn’t immediately available to comment on the report.
Meanwhile, JPMorgan said iPhone SE sales may be limited in China, where the analysts said delivery lead times have expanded and store pick-up is unavailable due to COVID lock-downs.
The iPhone SE launched on March 18. While marketed as a budget product, the iPhone’s $429 price tag is still a surprising hike from the $399 model Apple launched in 2020.
Apple’s smartphone market share in China hit a record high in the fourth quarter of 2021, with the iPhone maker reclaiming the number one spot in the country for the first time in six years.
JPMorgan warned of a competition risk with local players in China and India that are better situated and have more leverage in the market. Local tariffs could also hurt Apple’s ability to compete in these international markets, JPMorgan said.