(Updates shares in eighth paragraph.)
Sept. 26 (Bloomberg) -- Apple Inc. is cutting orders to vendors in the supply chain for its iPad tablet computer, a move that may result in slower sales for companies including Hon Hai Precision Industry Co., JPMorgan Chase & Co. said in a report.
Several supply-chain vendors indicated in the past two weeks that Apple lowered fourth-quarter iPad orders 25 percent, the first such cut that analysts at JPMorgan’s electronic manufacturing services team in Hong Kong said they have ever seen. The report didn’t list the affected companies, and Gokul Hariharan, one of the report’s authors, said he couldn’t comment when reached by Bloomberg News today.
For a vendor such as Hon Hai, the cut could mean a drop to 13 million units in the fourth quarter from 17 million units in the third quarter, JPMorgan analysts wrote in the Sept. 25 report. The report said JPMorgan U.S. analyst Mark Moskowitz, who covers Apple, does not expect to lower his projection of 10.9 million to 12 million units of iPad shipments in the third and fourth quarters after the supply chain adjustments.
Reduced orders from Apple to iPad suppliers could reflect both weakening demand in Europe due to economic conditions there as well as a strategy by Apple, the world’s biggest company by market value, to operate with reduced inventory, Wanli Wang, a Taipei-based industry analyst at RBS Asia Ltd., said today.
“It’s back to reality,” Wang said. “Now it seems even for Apple, due to the market situation, we need to be conservative.”
So far there is no confirmation from Apple that it has reduced orders to suppliers, Wang said. Carolyn Wu, a Beijing- based spokeswoman for Apple, didn’t respond to calls for comment on the report today.
Edmund Ding, spokesman for Hon Hai, didn’t respond to an e- mail or answer calls to his Taiwan and China mobile phones.
Shares of the Cupertino, California-based iPad maker fell $8.21, or 2 percent, to $396.09 at 9:48 a.m. on the Nasdaq Stock Market. The stock had climbed 25 percent this year before today.
Apple’s iPad may account for 73 percent of tablet computer sales this year, according to research firm Gartner Inc. Products that run on Google Inc.’s Android operating system, including Samsung Electronics Co.’s Galaxy tablets, will probably have about 17 percent of the market, Gartner said in a Sept. 22 note.
Because of its current dominant market position, Apple doesn’t have to rush to introduce its iPad 3 tablet computer as potential rivals have failed to emerge to siphon sales from the current model, JPMorgan’s Moskowitz wrote in a Sept. 16 report.
Amazon.com Inc. may release a product late this year that could become the number-two tablet in the market behind the iPad, Moskowitz wrote in that report.
--Edmond Lococo, with assistance from Janet Ong in Taipei. Editors: Nicholas Wadhams, Garry Smith.
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