The drop reflects "weak demand because of the iPhone X's high price point and a lack of interesting innovations," the New York-based research firm said in note to clients Friday.
"Bad news here is that highly publicized and promoted X did not boost the global demand for iPhone X," according to the note.
Apple has been counting on a redesigned 10th anniversary iPhone to boost shipments as its market value advances toward US$1 trillion ($1.42 trillion).
The Cupertino, California-based company is facing new challenges from Samsung Electronics, which is quickly recovering from the Galaxy Note 7's recall after fires.
In the meantime, Chinese brands such as Huawei, Oppo and Xiaomi are also luring away potential customers in China and other emerging markets such as India.
Apple is said to have trimmed its first-quarter sales forecast to 30 million units from 50 million, Taiwanese newspaper Economic Daily News reported, citing unidentified supply chain officials.
It also said Hon Hai Precision Industry's main iPhone X manufacturing hub in Zhengzhou, China, stopped recruiting workers.
The company also known as Foxconn is the sole iPhone X assembler, and also makes the handsets in Shenzhen and Chengdu.
Shares of Asian suppliers, such as Lens Technology, Shenzhen Desay Battery Technology and Largan Precision fell Monday on the report.
An Apple representative declined to comment on production arrangements. Foxconn said in an emailed statement that company policy prevents it from commenting on such matters.
Apple received a rare downgrade last week from Nomura Instinet analyst Jeffrey Kvaal, who said iPhone X sales as well as other positive factors are already baked into the stock price. He lowered his rating to "neutral" from "buy."
The stock has soared 51 per cent this year, bringing its market value to almost US$900 billion.
Bloomberg
