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Mobile industry bellwether Murata Manufacturing Co. expects Apple Inc. to reduce iPhone 14 production plans further in the coming months because of weak demand, which would force the supplier to again cut its outlook for its handset-component business.

“Judging by handset availability in stores, I see a downward revision happening," Murata President Norio Nakajima said in an interview. “I hope that it won’t be too deep."

Apple has trimmed iPhone output on softening demand and may slash production further, Bloomberg reported last month. Nakajima’s comments add to the evidence of slowing spending by consumers hit by rising interest rates, elevated inflation and sputtering economic growth.

Apple shares fell 0.5% at 9:40 a.m. in New York.

Nakajima didn’t identify Apple by name — common practice for suppliers to the infamously secretive company. Yet Apple is his key US customer and he didn’t deny that his references were to the iPhone giant.

Murata has already cut its global smartphone production forecast for this fiscal year a few times. The company initially anticipated in April that handset makers would produce 1.37 billion units, a slight increase from 1.36 billion in the previous fiscal year. It lowered its prediction to less than 1.2 billion in October, then 1.09 billion two weeks later — both because of weaker demand for lower-end phones in China. Nakajima said the latest estimate is 1.08 billion, a slight downward revision because of slower sales of handsets by Chinese manufacturers.

“If our forecast was to fall further, that would be because of the US customer," he said.

Apple no longer discloses iPhone sales, but Bloomberg News reported it had initially targeted production of 90 million units in the current quarter, which the company cut to 87 million due to slumping demand a month ago. UBS this month said the entire iPhone 14 generation may fall short of earlier expectations by 16 million units.

The Kyoto, Japan-based manufacturer is a linchpin of the smartphone industry, providing electronic modules and components for Apple’s iPhones, Samsung Electronics Co.’s Android smartphones and China’s leading device makers.

Bloomberg last week reported that Apple faces a deficit of 6 million iPhone Pro units this year because of turmoil at a China manufacturing hub. Still, Murata isn’t worried about supply-side problems because production can be recouped in January and February, said Nakajima, 61. Demand-side weakness is a concern, he said.

“I went shopping with my son last Sunday to buy a handset by our main customer for him, and the store had every model and every color in stock," he said. “I wouldn’t be surprised if, down the road, the customer even further revises down its forecast."

The global smartphone market is set to keep deteriorating next quarter, even as some Chinese handset makers are planning to release new models during the period, Nakajima said. The manufacturers are confident that the new phones will sell well, but Nakajima said he has his doubts as the incoming models don’t have enough enticing new features.

The phone market will start recovering “at a gradual pace" in the fiscal year starting in April, he said.

Despite the recent weakness in China, the world’s second-largest economy will remain an important market for the electronics industry, Nakajima said. Some of Murata’s customers are shifting production to Vietnam, India and other Asian regions, but a complete pullout from China is unlikely, at least during the next five years or so, he said.

Nakajima is running a long-term project to build a production chain for Murata that operates completely in China, using local parts. The move is aimed at addressing a potential deterioration in US-China relations — for instance Beijing mandating that all products sold in the country rely on local components.

Information security is a concern though, and Murata is seeking to ensure that its proprietary knowhow related to manufacturing technologies isn’t compromised, Nakajima said. The company may make mature products such as multilayer ceramic capacitors in China, but won’t move production of some newer components to the country, he said. Murata makes 65% of its products in Japan.

“China is a market that will grow further, and thus we must be ready to seize the opportunity," he said. Still, “we can’t move the production of some products, including high-frequency devices and communication modules that we make solely in Japan, because protecting confidential information is a priority."

 

This story has been published from a wire agency feed without modifications to the text.

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