The effects of the war in Ukraine and inflation i the U.S. have been most clearly seen in the high gas prices. But now the ramifications are reportedly even being felt at Apple: According to Nikkei Asia, the company is cutting its production orders for the new iPhone SE by 20% next quarter and is also slashing AirPods orders by 10 million for 2022.
Sources told Nikkei that inflation and the war in Ukraine were the reasons behind Apple's conservative moves. The company halted sales in Russia and reportedly anticipates that demand for devices will slow in Europe as a result of the conflict.
"The war has affected spending at the European markets. ... It is understandable [consumers will] save the money for food and for heating," an unidentified Apple supplier told Nikkei.
Basically, the perfect storm of economic factors may finally be hitting consumer electronics companies that have been unable to keep with demand over the last two years. In addition to the conflict in Europe, inflation in the U.S. had already soared to 7.9% by late February when the war began, and the ongoing chip shortage caused by pandemic-related supply chain disruptions has only increased the squeeze on hardware manufacturers. Two weeks ago, two major sources of neon in Ukraine were forced to shut down, limiting the supply of a vital component for making chips.
Some companies, like Elon Musk's Tesla and SpaceX, are raising prices to deal with inflation. Apple may decide to do the same, though cutting supply may help the company mitigate a financial hit. But it is unusual for Apple to cut production for a brand new iPhone — even one designed for a budget-minded audience — and the move is considered a legitimate indicator that consumer habits are catching up to the strained economic conditions.