Sharp reduced production at its Kameyama plant to minimal levels needed to keep it running. The slowdown began in late 2012 as Apple tried to manage its inventory, according to the sources.
Apple and Sharp refused to comment on the report, but Reuters argues that the move is indicative of seasonal changes in demand as well as the impact of the iPad mini. It appears more consumers are choosing the mini over traditional 9.7-inch iPads.
Macquaire Research estimates shipments of 9.7-inch iPads will tumble almost 40 percent in Q1, from 13 to 8 million. However, the decrease should not have a significant effect on overall sales figures, as iPad mini sales remain strong. Analysts estimate Apple's Q3 iPad shipments at 14 million units.
The report is the last thing Apple needs at this point. Its shares already dropped below $500 earlier this week, on reports that it is curbing orders for iPhone 5 components.
We are also seeing a torrent of rumours pointing to a cheaper version of the iPhone, designed for emerging markets. Just a few months ago overly optimistic analysts were expecting Apple to hit $1,000 by the end of 2012. In reality, Wall Street is starting to look beyond the hype and the focus is shifting to more gloomy problems facing the company in the long term.
Although Cupertino enjoys a cultish following and brand loyalty was never in question, strong iPad mini sales seem to indicate that traditional Apple consumers are open to cheaper gear. With that in mind, a plastic iPhone could make sense, but it would come at a price, as it would inevitably eat into iPhone 5/5S sales, much like the iPad mini.