There’s more bad news for Apple – on the production front and on Wall Street.

Sharp Corp. slowed a Japanese production line making screens for Apple iPads to a minimum level as the U.S. company manages inventory, according to a Reuters report.

Meanwhile, a major Apple (Nasdaq: AAPL) investor reported Thursday that it had reduced its holdings of Apple shares due to concerns about the company’s future.

The slowdown at Sharp’s Kameyama plant in central Japan started at the end of last year, and output of the 9.7-inch screens is now at the lowest rate needed to keep the line running, Reuters reported, citing two people it didn’t identify who have knowledge of Sharp’s production plans.

Heihachiro Ochiai, a spokesman for Sharp, declined to comment, Bloomberg news reported. 

The Osaka-based company also makes panels for Apple’s iPhone 5.

Carolyn Wu, a Beijing-based spokeswoman for Apple, didn’t immediately respond to calls to her office and mobile phones. She didn’t immediately reply to e-mail and text message to her mobile phone.

Reuters reported that it was unclear how much of the slowdown was due to seasonal changes in demand or consumers choosing the smaller iPad mini introduced last year. The Nikkei newswire reported Jan. 14 that orders for iPhone 5 parts had been cut by about half following lower-than-expected sales, underscoring concerns about the smartphone market and sending Apple shares to an 11-month low.

Sharp also is cutting production of iPhone panels to about 40 percent of capacity from close to 100 percent in the previous three months, the Nikkei reported. Sharp gets 3.4 percent of sales from Apple, its biggest customer, according to data compiled by Bloomberg.

Investment Firm Cuts Apple Stake

Meanwhile, in other less than good news for Apple, Franklin Templeton Investments cut its holdings of Apple shares last year on concern the maker of the iPhone lacks a strategy to sell cheaper smartphones in emerging markets such as China and India.

Apple’s stock slipped below $500 for the first time in 11 months on Monday on a streak of recent bad news.

Apple shares fell as low as $498.51 Monday before rallying to close above $500 at $501.75. The share’s 52-week low is $419.55, its high $705.07.

On Thursday, Apple shares closed at $502.68.

With the U.S. market “saturated,” Apple needs to expand in developing nations, George Russell, a portfolio manager for the Franklin Equity Group, said at a conference in Singapore. The Franklin U.S. Opportunities Fund pared its holdings of Apple to 4.2 percent at the end of last year from about 7 percent in 2011, Russell said. Apple is still the fund’s biggest holding as of the end of last year, he said.

The fund bought shares of Google Inc. and Inc., he said.

“We trimmed on a few occasions last year,” he said today, referring to Apple. “We are concerned about their lack of a strategy in the lower-end phone which tends to be sold much more in the emerging market. U.S. is pretty saturated. It’s emerging markets where there’s incremental new growth.”

Apple fell to the lowest price in 11 months in New York on Jan. 14 after the Nikkei reported production of its latest smartphone model, the iPhone 5, was scaled back on weak demand. IPhone sales could be slowing because smartphones are already common in developed markets, where Apple is strongest, said James Cordwell, an analyst at Atlantic Equities Service in London.

The U.S. Opportunities Fund, which had assets of $2.51 billion at the end of the last year, has gained 10 percent over the past year, trailing 70 percent of rival funds, data compiled by Bloomberg show. The fund has beaten 74 percent of peers over five years with a 4.9 percent advance.

China Economy

The Cupertino, California-based company needs to overhaul its supply chain to meet demand for cheaper smartphones in emerging markets, former chief executive officer John Sculley said in a Bloomberg television interview on Jan. 15.

Apple’s CEO Tim Cook said China will overtake the U.S. to become its largest market. The company had $5.7 billion of sales in China during the quarter ended September. U.S. revenue was about $14.4 billion, based on figures in an Oct. 25 earnings statement.

China’s economy has “turned the corner,” Dennis Lim, who helps manage $48 billion of emerging-market funds at Templeton, said today from Singapore. A government report today showed economic growth accelerated for the first time in two years as government efforts to revive demand drove a rebound in retail sales, industrial output and the housing market.

Nokia Oyj boosted its share of the basic-phone market to 35 percent last quarter, the highest in two years, by adding features such as quicker Web and online games to its Asha handsets popular in faster-growing economies including India and China.
Apple shares fell 0.7 percent to $502.68 in New York trading yesterday. The shares have lost 1.4 percent this year after gaining 31 percent in 2012.

Apple hasn’t “addressed how they are going to attack the low-end phone market,” Russell said. “For that reason, we feel the margin structure of their high-profit type of product could be under pressure.