Apple Inc. (AAPL) is cutting production of its iPhone line by 10% in the first quarter of 2017. The Nikkei Asian Review used data from suppliers to compute this estimate. The Nikkei article was released today at 10:00 AM Eastern Standard Time (2:00 AM Saturday Japan Standard Time), and Apple’s share price was down $1.03, or 0.88%, as of 2:19 PM EST.

Sluggish Demand

The Nikkei reports that Apple slashed production of the older iPhone 6 in the first quarter of 2016, due to high inventories. Based on this experience, the company chose to reduce production of the new iPhone 7 by about 20% from initial projections. The iPhone 7 was released in September 2016.

An subsequent article in Barron’s points out that demand for the iPhone 7 has been dampened by a lack of exciting new features. As a result, owners of the iPhone 6 haven’t had compelling reasons to upgrade.

The specter of market saturation also is looming. Global market intelligence company IDC, according to the Nikkei, is forecasting worldwide shipments of smartphones, from all manufacturers, to be flat in 2016, compared to 2015.

But Strong in Japan

The one bright spot for Apple, as reported by the Nikkei, is the Japanese market, where demand for the iPhone 7 line remains strong. However, Japan accounts for only about 10% of smartphone sales worldwide. A strong selling point in Japan, where contactless payments are growing rapidly, is the compatibility of the iPhone 7 with these technologies.

Unmet Demand

In the meantime, Apple has been unable to meet demand for its larger iPhone 7 Plus. This phone has two cameras, wide-angle and telephoto, and offers the capability for optical zoom, in addition to the lower-quality digital zoom. (See iPhone 7 technical specifications.) The problem is a shortage of camera sensors, the Nikkei says.

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