Why Apple’s suppliers aren’t feeling the cheer

Apple positioned for better growth in 2016: Motley Fool

Apple's iPhone 6S may be a letdown for the technology giant's suppliers, with analysts expecting cuts to production forecasts.

Deutsche Bank expects Apple to cut production of its latest phone with its industry checks suggesting the iPhone production forecast for the last three months of 2015 has already been reduced to around 75 million units from the previous 80 million expected.

"The huge success of iPhone 6 (which addressed the long-awaited demand for 'big' iPhones) has created a tough hurdle for its successor to surpass," Deutsche Bank analysts said in a note Tuesday.

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"Our long-term view on the Greater China Apple supply chain remains positive," it added. "But, for the near term, we agree that iPhone 6S is a less successful product than iPhone 6, and expect Apple to keep mildly trimming iPhone production forecasts in the coming months."

But the bank noted that while lower production of the 6S has likely been well telegraphed to the market, it's set to dampen interest in suppliers' shares.

The Apple Store in Grand Central Station in New York City.
Mike Segar | Reuters

In Asian market hours, many of Apple's suppliers saw their share prices drop in midday trade. In Taiwan, Hon Hai shed 1.0 percent and Foxconn Technology fell 0.6 percent, while Japan-listed Asahi Glass dropped 1.6 percent and Hong Kong-listed AAC Technologies was down 1.0 percent.

Deutsche Bank is looking ahead to the second half of next year, when it expects the iPhone 7 will meet with better demand, both from current iPhone 6 owners with expiring two-year contracts and iPhone 6S owners who bought their devices on Apple's one-year leasing program.

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To be sure, a less-exciting 6S performance isn't necessarily being felt in Apple's bottom line. Apple's earnings for its fiscal fourth quarter beat analysts' expectations, coming in at $1.96 a share, compared with a Thomson Reuters forecast for $1.88 a share. But the number of iPhones sold in the quarter was slightly short of Wall Street's expectations.

Other analysts are also pinning their growth expectations on the iPhone 7 launch.

"Unequivocally, they're positioned for much better growth in 2016 when they launch their more flagship iPhone 7," Eric Bleeker, senior tech analyst at the Motley Fool, told CNBC.

That's important for Apple because the iPhone contributes more than 60 percent of its earnings, and it will take a while for new products, such as the Apple Watch, to be felt, he said.

--Jacob Pramuk contributed to this article.

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