Just before Apple’s September launch of the iPhone XS, pundits recommended that potential customers wait until the iPhone XR arrived in October to pick a phone — a suggestion that could have boosted sales of the less expensive model. But a new Nikkei Asian Review report suggests the XR is instead seeing “disappointing demand,” leading Apple to scuttle plans to increase XR production. The surprising reason: Users are gravitating toward the more affordable iPhone 8 and iPhone 8 Plus.
According to the report, Apple’s key manufacturing partners Foxconn, Pegatron, and Wistron were all prepared to produce plenty of iPhone XR units for the typically blockbuster holiday season. However, Foxconn was only running 45 of 60 total production lines created for the XR, Pegatron was similarly below peak capacity, and Wistron was on standby for “rush orders.” Nikkei says Foxconn and Pegatron were given signals to halt plans for increasing XR production, and supply chain sources indicate Wistron won’t receive XR orders during the holidays.
Instead, Foxconn and Pegatron are said to be receiving 25 percent higher orders for iPhone 8 and iPhone 8 Plus phones, adding around 5 million additional units to Apple’s prior ordering plans. The year-old iPhones are considerably less expensive than the iPhone XR, a factor Nikkei claims “illustrates Apple’s lack of innovation and inability to energize consumers” with its current pricing strategy.
Apple has repeatedly groused about the supposed inaccuracy of external measures of device demand based on reports from its supply chain. But the company announced last week that it will no longer provide its own quarterly tallies of iPhone, iPad, or Mac unit sales, the only alternative to relying on external estimates. The announcement was decried by both analysts and journalists, who concurred that the company was preparing to mask anticipated declines in unit sales. As a result of the reporting change and predictions of declining sales, Apple’s stock fell sharply, and its market capitalization dropped under the $1 trillion mark.
Nikkei says there’s precedent for the iPhone ordering change: Apple reportedly made last-minute rush orders for iPhone 7 devices after the iPhone 8 and iPhone X launched at higher price points, suggesting that some consumers aren’t as concerned with the latest technology as they are with more reasonable pricing. The size of that price-sensitive customer base could impair Apple’s ability to keep raising the average selling price of its devices, a strategy it appears to be testing with the more expensive iPhones, iPads, and Macs introduced this fall.