Apple's Vision Pro headset is getting colder, with many supply chain sources saying Apple has decided to reduce production.

On October 23, Eastern Time, The Information cited multiple sources directly involved in the production of components for the device, stating that since early summer of this year, Apple has significantly reduced production of the Vision Pro mixed reality headset and may completely cease production of the current version of the device by the end of the year.

According to The Information's previous report, earlier this year Apple decided to manufacture a cheaper headset than the existing version (priced at $3500), which may be released by the end of 2025.

Simply put, this move may indicate that Apple finds the current version of the mixed reality headset too expensive and difficult to sell, so they plan to make a cheaper version. The current expensive version may not be produced by the end of the year. Apple's decision to halt production may also mean that they already have enough inventory to sell, so they are not in a hurry to produce new ones.

At the same time, according to another source directly involved in Apple's supply chain, they have also suspended the upgrade research and development work on the second-generation high-end version for at least a year, waiting to decide later.

Additionally, analyst Ming-Chi Kuo cited industry research on Wednesday, stating that the orders for iPhone 16 have decreased by approximately 10 million units from the fourth quarter of 2024 to the first half of 2025. In the upcoming quarters, Apple's iPhone production will be lower than the same period last year. The market is bullish on Apple's Apple Intelligence being able to increase iPhone sales quickly, but the recent decrease in orders from Apple suggests that this optimistic outlook may not materialize soon.

Affected by this news, apple's stock price fell more than 3.4% in Wednesday's intraday trading and eventually closed down by over 2%.

Report: Multiple vendors reduce production of Vision Pro components.

Apple's first Vision Pro headset did not sell well because it was too expensive and had too little usable software. Employees from three electronic and mechanical parts suppliers for Vision Pro said they had enough parts to make 0.5 to 0.6 million headsets, but Apple's sales forecast was very pessimistic, so they stopped production of parts in May, with tens of thousands of undelivered parts still in the warehouse.

For apple, Vision Pro is its biggest bet in new product categories over the years. However, Apple has fallen behind its competitor Meta in this field, as Meta has been selling headsets for several years, at a cheaper price, with the latest model selling for only $300.

Research institution Counterpoint stated that Apple sold about 0.37 million headsets in the first three quarters of this year, and is expected to sell only about 0.05 million by the end of the year. In comparison, Meta sold about 6 million Quest 2 and 3 million Quest 3 headsets in the first three quarters after launch, despite these devices being priced lower.

An employee at Luxshare Precision Industry mentioned that in recent weeks, Apple has informed Luxshare Precision, responsible for the final assembly of Vision Pro, that production may need to stop in November. Luxshare Precision produces about 1000 Vision Pro headsets per day, less than 2000 at peak times. Since production began last year, leading to the release in the USA in February this year, a total of about 0.5 million to 0.6 million headsets have been assembled.

According to sources in Apple's supply chain, Apple started ramping up production of Vision Pro headsets and related components last autumn, so Apple may now have enough inventory to sell this device until next year. They also indicated that if sales start to rise, Vision Pro production can quickly resume as Apple has not dismantled the production line.

According to a person involved in the Vision Pro supply chain, Apple has informed a supplier that during the entire production period of the upcoming cheaper version (internally code-named N109), they will need to produce enough components for 4 million headsets. In contrast, Apple had previously estimated the need to produce 8 million, but this estimate was made before the product was launched.

Although Apple's high-end Vision product development is currently on hold, analysts and sources involved in the Vision Pro supply chain suggest that Apple may still make some small updates to Vision Pro, such as tweaking its appearance design. In this case, Apple may upgrade the main processor, while keeping the other parts of the device mostly unchanged to utilize excess components.

In an interview published on Sunday, Apple CEO Tim Cook told The Wall Street Journal that Vision Pro is too expensive and not a product for the masses, but some tech enthusiasts who like to try new technologies are still willing to buy it. Cook said: "This product is prepared for those who want to use tomorrow's technology today, and there are quite a few of these people, which makes me quite excited."

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Ming-Chi Kuo said iPhone 16 orders have decreased.

Wall Street bankers are speculating how many units Apple's new phone can sell; their guesses are very high, but these forecasts are not based on real evidence, but rather to justify the high target price of Apple's stocks.

But the accurate Elevation Securities Apple analyst Ming-Chi Kuo, citing industry surveys on Wednesday, said that from the fourth quarter of 2024 to the first half of 2025, iPhone 16 orders have decreased by approximately 10 million units, primarily affecting non-Pro versions of the phone. As a result, it is now estimated that the production volume of iPhone 16 in the second half of 2024 will be about 84 million units, which is less than the previous estimate of 88 million units.

Based on these reduced orders, it is now estimated that the total production volumes of iPhones in the fourth quarter of 2024, the first quarter of 2025, and the second quarter of 2025 are approximately 80 million units, 45 million units, and 39 million units, respectively, all lower than the same period last year (compared to about 84 million units, 48 million units, and 41 million units in the fourth quarter of 2023, the first quarter of 2024, and the second quarter of 2024).

In addition, mass production of the iPhone SE4 will start in December 2024, with an estimated production volume of approximately 8.6 million units from December 2024 to the first quarter of 2025.

Ming-Chi Kuo's analysis and conclusions are roughly three points:

Despite the decrease in iPhone production by Apple, the impact of the production cut may not be evident in the last quarter of this year. This is because in the last quarter of last year, Apple produced many phones but did not sell as many, while this gap has narrowed in the fourth quarter of 2024. Additionally, in this year's fourth quarter, there are more higher-priced Pro Max models being sold, which is beneficial for revenue.

However, it is expected that iPhone revenue in the first half of 2025 will face pressure. On one hand, the number of phones sold may decrease compared to the same period last year. On the other hand, the newly launched SE4 model may not be as profitable as the Pro Max, so overall revenue from phone sales may be affected.

In addition, mass production of the iPhone SE4 is expected to start in December 2024, with an estimated output of approximately 8.6 million units from December 2024 to the first quarter of 2025.

Most suppliers providing components for the iPhone may start feeling pressure from the end of the fourth quarter of 2024, with a more pronounced impact expected in the first half of 2025.

Some market participants are optimistic that Apple's Apple Intelligence may significantly increase iPhone shipments soon. However, recent declines in Apple's orders suggest that these optimistic expectations may not materialize in the short term.

Ming-Chi Kuo believes that Apple is most likely to succeed in built-in AI devices and is confident in the long-term potential of Apple Intelligence becoming a popular paid service. However, significant growth in iPhone shipments may require further hardware innovations to complement AI development.

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