Apple cuts iPhone SE production by 20% less than three weeks after launch

Yahoo Finance's Dan Howley details Apple's decision to cut iPhone SE production orders due to weak demand amid inflation and geopolitical events like the Russia-Ukraine conflict, in addition to commenting on the new iPhone's design.

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Apple is planning production cuts to an iPhone model and AirPods, according to Nikkei, who cited sources close to the decision. Here with more, we've got Yahoo Finance's tech reporter, Dan Howley. Dan, we got to know how deep and ranging the production cuts may be.

DAN HOWLEY: Yeah, the production cuts appear to be mostly geared towards, as you said, the iPhone SE. That's the latest smartphone that Apple introduced-- it costs $429-- and it's only been out for a few weeks now. This is the 20% cut to production versus what Apple was previously looking at.

They also are cutting production of regular iPhones, though not nearly as large of a cut. And to AirPods now, a lot of this the speculation is that it has to do with the war in Ukraine, as well as rising inflation or inflation as it is.

People not necessarily looking to spend a lot of money outside of perhaps, having to buy groceries, and gas-- things along those lines-- the necessities-- so Apple making this cut.

But on the other hand, this also, usually isn't the big selling time for Apple. Yes, the iPhone SE just came out, but it's not going to be a major volume seller like the regular iPhone line-- the 13, which itself isn't that large of a volume seller so-- the mini rather. We could say from the regular 13 to the Pro Max, those are really the big sellers for Apple.

And so if we had seen these kind of cuts, I think from the September time frame-- late September time frame or early October, shortly after they announced their main iPhone line, then that would be a little bit more concerning.

But this may not be as big of a deal as it's seemingly presented just because this is the SE line. It was a means for Apple to get more 5G phones into the hands of consumers who are looking to spend a little bit less on their devices, which is helpful.

But I think for Apple, overall, they're really looking for a higher average selling price. That's what investors are really interested in. And so I don't think it's going to be as big of a jarring hit as it would be if it was those mainstream iPhones.

- You really lay out something key and that the timing of when this may be taking place for these production cuts-- not as bad as it could be. So with that in mind, what does this tell us about the cycle that we find Apple in more broadly?

We've talked about these super cycles in the past or where they may be on perhaps a release schedule for some of the colors, and changing up the colors, or the SE, and making it more affordable. Where do we find ourselves in those broader cycles as of right now?

DAN HOWLEY: Well, Apple has blown expectations completely away with the iPhone 13 line. They had great quarters so far with that phone. This is their second generation 5G device, so they're doing great on that front. There's really nothing for them to worry about there.

I think but the SE, again, it's really the entry level smartphone. Yes, it has 5G, but it's not necessarily the one that I think most people would opt for. It's got an older design. It does have the same processor as the current generation iPhone-- the iPhone 13.

But you only get one camera, you get a much smaller display, you get touch ID instead of face ID, so I think for people who are looking to get at least the latest and greatest design as well as camera-- camera sells. Camera and display are some of the biggest selling points for smartphones.

And I think if most people look at the iPhone SE and then they look at the iPhone 13 Mini, which has a larger display, and is a few dollars more, then they would go for the iPhone 13 Mini.

So again, I don't think that this is a panic button situation for Apple. It just seems to me that they're obviously taking into account what's going on as far as the economy as a whole, and making the right moves for production at this point.

And as far as the AirPods go, they're older at this point-- the original AirPods. And there's no specification as to whether or not they're the pros, or the second generation AirPods, are third generation AirPods.

So if you think that it's the regular generation AirPods-- the first generation or second generation even, rather, it doesn't necessarily mean that those are selling poorly.