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Apple cuts iPhone production ahead of next-gen model

It is, however, looking to ramp up production for the new iPad with an additional supplier for the HD Retina Display, according to Sterne Agee.

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Roger Cheng
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Production could be slowing down for the current generation of the iPhone. Apple

Apple may already be prepping for the production of its next-generation iPhone.

The company is significantly cutting back on the production of the current iPhones, according to supplier checks by Sterne Agee analyst Shaw Wu. The number of iPhones produced may have fallen by 20 percent to 25 percent on a quarter-over-quarter basis, Wu said in a research note published today.

The reduction suggests Apple is being conservative and giving suppliers a two-quarter pause ahead of the introduction of a new iPhone, which Wu believes will come around September or October. The pause will allow suppliers to better manage inventory and prepare for the new model.

Apple had similarly reduced the production of iPhone 4 devices ahead of the iPhone 4S.

As a result of the checks, Wu pegs the potential shipment of iPhones at 26 million to 28 million units, below Wall Street's average estimate of 30 million to 31 million. He noted that the reduction was due primarily to the iPhone refresh, as opposed to weaker demand for the product.

The new iPad, however, continues to perform well, and Wu said he expects a slight increase in the production thanks to the addition of a new supplier. Apple faced some constraints early on with supply limited on the high-definition Retina Display, but seems to have addressed the issue, he said.

"We believe this will enable Apple to be better equipped to meet strong demand and deliver upside relative to consensus expectations," Wu said.

Wu raised his estimate for iPad shipments in the quarter to 15 million from 14 million units.