Last week, JPMorgan surprised Wall Street when its tech/semi analyst Narci Chang slashed his outlook on iPhone X demand, forecasting production of Apple's flagship phone would plunge of 50% Q/Q, "even larger than the decline of the iPhone 8/8+" and noted that the "weakness will continue in 1H18 as high-end smartphones are clearly hitting a plateau this year."

Following JPM's downgrade the Apple Supply Chain in mid-September given that: 1) iPhone X expectations are largely priced in, and 2) sustained growth into the 2018 iPhone cycle is unlikely, given limited design changes in the next cycle, Chang warned that "now we believe the peak has arrived even earlier than our expectations."

One week later it appears he was right because as the Nikkei reports this morning, JPM's worst case outlook has now been confirmed, and Apple will halve its production target for the iPhone X in the three-month period from January from the figure of over 40 million units envisaged at the time of its release in November. The Japanese news website writes that Apple notified suppliers that it had decided to cut the target for the period to around 20 million units, in light of slower-than-expected sales in the year-end holiday shopping season in key markets such as Europe, the U.S. and China.

According to Nikkei, "the iPhone X, Apple's first smartphone equipped with an organic light-emitting diode display, has failed to catch on globally -- something many put down to a price tag starting at $999."

Looking forward, the lackluster sales could result in a delay to the company's plans to introduce OLED screens in other models.

For a period after its launch, production of the model faced a supply shortage due to delays in component delivery. With the inventory now starting to rise, Apple can slow down production.

The high price tag is largely the result of the cost of OLED panels made by Samsung Electronics, the sole supplier of the component. The South Korean giant is currently the only company that can guarantee a steady supply of the screens. In response, Apple is believed to have started considering an increase to proportion of liquid crystal display iPhone models by reducing production of the OLED screen models scheduled for release this year.

The company is expected to maintain a total production target of 30 million units for lower priced models such as the iPhone 8, 8 Plus and the 7.

Aside from impacting Apple's own top line and guidance, the production cuts for the X will have a domino effect on manufacturers that have supplied high-performance components for the handset, with the combined impact expected to run into billions of dollars. It could also slow down the shift at display manufacturers from LCD to OLED technology.

It is unclear how much of the news is priced in: last week, Morgan Stanley lowered Apple's price target on slower iPhone demand, although Wall Street is still expecting a blockbuster quarter and forecast when the company reports its earnings on February 1.