"This Is Very Rare" - Apple Slashes iPhone 8 Supplier Orders By 50% As Demand Dries Up

Following reports this morning that channel checks show iPhone 7 outselling iPhone 8, Taipei-based Economic Daily News reports that orders for iPhone 8 and Plus have been slashed by around 50% for November and December, citing an unidentified official at the supply chain.

As we detailed earlier, a new report by KeyBanc Capital Analyst John Vinh, channel checks have revealed that Apple"s older iPhone 7 models are outselling the recently launched iPhone 8 ahead of the early November debut of the premium iPhone X.

As traditionally new editions of the iPhone have sold quickly as fans queue for the latest upgrade, this time it"s clearly different...

 As pent up demand for the iPhone X is clearly cannibalizing sales, and the surveys add to signs that the iPhone 8 is not proving as popular as its predecessors.

"Many respondents indicated that a meaningful portion of customers are buying iPhone 7 in lieu of the new iPhone 8, given the lack of significant enhancements in the new phone," Vinh wrote in his research report, which relied on channel checks in the United States and United Kingdom.

"Feedback from stores indicate customers are waiting to purchase the iPhone X or to compare the iPhone X before buying the iPhone 8," wrote Vinh, who is rated four out of five stars by Thomson Reuters StarMine for his recommendation accuracy on the Apple stock.

Another reason for the slow uptick of the iPhone 8 could be the modest promotion by U.S. carriers, Vinh said. "While carriers continue to offer promotions for the new iPhone 8, they have been much more modest compared to the iPhone 7 launch last year," he wrote.

Which probably explains why Economic Daily News reports that Apple is now betting all-in on the iPhone X, cutting supplier orders on the iPhone 8 (and 8 Plus) drastically. [via Google Translate]

But the supply chain has said that "this year is quite rare", the new product has just been mass production for about one to three months, was asked to begin to decline, "is the first time in ten years."

Supply chain sources revealed that iPhone 8, iPhone 8 Plus expectations of 11 - 12 months of shipments of 1 to 1.2 million per month will be substantially reduced, down nearly half of the range, shipment will be only 500-600,000.

So, as we concluded earlier, with Apple bull hopes falling squarely on the shoulders of the iPhone X, a key unknown factor is what the price will be. The much-anticipated iPhone X, a glass and stainless steel device with an edge-to-edge display, will start shipping from Nov. 3 with the 10th-anniversary iPhone priced from $999, Apple"s most expensive mobile till date.

Apple Sues Qualcomm For $1 Billion

It has gone from bad to worse for mobile chipmaker Qualcom, which just days after getting sued by the US government, which accused the chipmaker of engaging in monopoly tactics over mobile phone components, was also sued this afternoon by the world"s biggest company. Apple filed a $1 billion lawsuit against its supplier, accusing Qualcomm of overcharging for its chips and refusing to pay some $1 billion in promised rebates for chip purchases. Apple said in its complaint that Qualcomm demanded onerous terms for its technology and that it withheld rebates because Apple cooperated with South Korea"s antitrust regulator, the Korea Fair Trade Commission, in its probe into Qualcomm licensing practice.

The KFTC fined Qualcomm Inc 1.03 trillion won ($854 million) in December for what it called unfair practices in patent licensing, a decision the U.S. chipmaker said it will challenge in court.

In its statement, Apple said that Qualcomm has taken "radical steps," including "withholding nearly $1 billion in payments from Apple as retaliation for responding truthfully to law enforcement agencies investigating them."

Apple added, "Despite being just one of over a dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined."

"If that were not enough, Qualcomm then attempted to extort Apple into changing its responses and providing false information to the KFTC in exchange for Qualcomm"s release of those payments to Apple. Apple refused," Apple also said.

According to the Apple complaint, Qualcomm’s terms required Apple to pay a percentage of the average selling price of an iPhone to use Qualcomm patents and to exclusively use Qualcomm chips in iPhones from at least 2011 to 2016. Apple received what it called quarterly rebates from Qualcomm under terms of the agreement, but Qualcomm began withholding those last year after Apple met with Korean regulators, the suit says.

The lawsuit is surprising in that Qualcomm is a major supplier to both Apple and its arch nemesis, Samsung Electronics for "modem" chips that help phones connect to wireless networks. The two companies together accounted for 40% of Qualcomm"s $23.5 billion in revenue in its most recent fiscal year. Furthermore, Qualcomm was the sole supplier of modem chips for Apple’s phones until the release of the iPhone 7 in September. Intel Corp supplied about half of the modem chips for the newest models, said Stacy Rasgon, a senior analyst at Bernstein Research.

Apple made the move around the same time that Samsung, which had switched to using its own internal chips for its Galaxy S6 phones, returned to Qualcomm for the Galaxy S7.

Meanwhile, Qualcomm"s legal problems continue to pile up. In February 2015, the company paid a $975 million fine in China following a 14-month probe, while the European Union in December 2015 accused it of abusing its market power to thwart rivals. In Washington on Tuesday, the U.S. Federal Trade Commission filed a lawsuit against Qualcomm, saying the San Diego-based company used its dominant position as a supplier of certain phone chips to impose "onerous" supply and licensing terms on cellphone manufacturers like Apple and to weaken competitors.

For now, Qualcomm "has been able to manage through (the Apple contract loss) pretty well because they got back Samsung at the same time," Rasgon said, however sensing weakness how long until Samsung likewise attacks its key vendor demanding easier terms too? Judging by the modest reaction in QCOM"s stock, the market does not see that as a likely possibility.