Apple Reportedly Cuts iPhone XS and iPhone XR Production Orders Amid Lower-Than-Expected Demand

[MacRumors]

In recent weeks, Apple slashed production orders for its latest iPhone XS, iPhone XS Max, and iPhone XR models due to "lower-than-expected demand," among other reasons, according to unnamed sources cited by The Wall Street Journal.

The report claims the production cuts have hit the iPhone XR hardest, with Apple said to have slashed its production plan for the device by "up to a third of the approximately 70 million units" it had asked some suppliers to produce between September and February, amounting to a reduction of up to 23.3 million units or so.

And in the past week, the report claims Apple told several suppliers that it cut its production plan again for the iPhone XR, as it battles a mature smartphone market and increasing competition from Chinese vendors like Huawei.

The production cuts are said to have "reignited frustration" among iPhone suppliers and "raised worries about Apple's ability to forecast demand."

We've heard this narrative before. Last year, a flurry of reports variously referred to the iPhone X as a "failure," "disappointment," and "flop." Another report said the iPhone X "did not live up to the hype." Yet, the iPhone X went on to become not only the top-selling iPhone at Apple, but in the entire world.

Apple also reported record-breaking iPhone revenue of $61.5 billion in the iPhone X launch quarter, so the device was anything but a flop.

Apple CEO Tim Cook has dismissed these kind of reports in the past. During an earnings call in January 2013, he noted that the company's supply chain is very complex and that conclusions shouldn't be drawn from singular data points:

Even if a particular data point were factual, it would be impossible to interpret that data point as to what it meant to our business. The supply chain is very complex and we have multiple sources for things. Yields can vary, supplier performance can vary. There is an inordinate long list of things that can make any single data point not a great proxy for what is going on.

Apple's financial chief Luca Maestri has also cautioned about trying to determine iPhone demand based on potentially misleading supply chain reports.

It is possible, however, that Apple is increasingly struggling to forecast iPhone demand. Today's report claims that Apple was "excessively optimistic" about its initial production forecast for the iPhone X, which it proceeded to slash "by some 20 million units" for the first three months of 2018.

Unfortunately, iPhone sales will be less transparent going forward, as Apple announced that it will no longer disclose iPhone unit sales in its earnings reports starting with the first quarter of its 2019 fiscal year.

Justifying the move, Maestri said unit sales are "not particularly relevant for our company at this point," as they are "not necessarily representative of the underlying strength of our business." He added that Apple may provide qualitative commentary related to unit sales if the info is valuable to investors.

Apple will still disclose iPhone revenue on a quarterly basis, however, and any significant year-over-year decline in that amount would help indicate if iPhone XS, iPhone XS Max, and iPhone XR demand is truly lower than expected.

AAPL is down nearly 15 percent since Apple's earnings report on November 1.

Article Link: Apple Reportedly Cuts iPhone XS and iPhone XR Production Orders Amid Lower-Than-Expected Demand

 

[2ilent8cho]

Need to cut the price, not the orders.

 

[MacFather]

Deleted.

 

[sequential]

keep robbing your customers and eventually it's going to come back to you.

 

[japanime]

Apple also slashed iPhone SE production — to zero.

That's when they lost me as a phone customer.

 

[bobob]

Who knows?

Maybe this will actually be the first time ever one of these supplier rumors actually is true and not just the usual stock manipulation ploy.

 

[Aluminum213]

Well, when the latest iPhone can’t beat LAST YEARS Google Pixel 2 in the camera, this will happen

Welcome to competition Apple

 

[Radon87000]

Good. Time to bring prices down to a sane level.

 

[Dan Holmstock]

Not being critical, just practical, but there was a story prior to the release of these phones, that with the iPhone 6s battery issue, with it being fixed for $29, that there would be at least 16 million fewer phones being bought (or maybe larger number), i fixed a few of those phones so far with a new battery and their owners are quite content. As far as the pricing for the new phones, this takes the "Apple Tax" to new levels. Seriously I wanted the new phone and on JOD with T-mobile they want $300 down for the XS, that is just beyond absurd, so like last year with the X release I passed and will continue too unless the price is dropped. There is no reason for this, to me and IMHO this is pure greed for these devices, they would sell more in volume is perhaps the XS was priced at $850.

 

[BruiserBear]

Their greedy push for bigger profit margins was bound to bite them in the ass. I won't be surprised one bit if the new iPad Pro sees sales fall off as well. They can't continue to raise prices with this much competition.

 

[oldoneeye]

Odd - vastly over-priced and fragile hardware not proving to be super popular .... who knew ?

 

[neilw]

Has there ever been an iPhone release where there were *not* stories like this? Most or all have turned out to be false.

 

[Smeaton1724]

At some point pricing starts to dictate demand, it appears nearly every single product Apple sell is borderline on that threshold. Times used to be updated products replaced the older ones at the same or similar price points. Now the new products come out at 20% at least price increase.

I suppose the issue with long term growth in consumer tech is that now a phone is a reasonable computer prices need to be increased to reflect the value they offer and in turn people won't rush out to but a new model straight away but will buy a new one when they need to.

 

[717]

Every. Year. Same. Stupid. Story.

 

[usersince86]

If Apple would simply cut the size (and the price) of just one model, I believe they'd sell more than they can imagine. As it stands, every new iPhone is big. Some of us don't want a bigger phone, just a more advanced one. Come on, Apple! Listen up!

 

[skippermonkey]

I just upgraded from an ageing iPhone 5s to a brand new 8. The spec is good enough and the price, at £599, sane enough for what I need. I contemplated the X range but the prices are simply too high. Apple needs to start living in the real world with regards pricing – its devices are good, but not so good that they can command the premiums that Tim and co. are throwing on, seemingly at random. Like the new Mac Mini, for example.

 

[ChrisMoBro]

Yet, the iPhone X went on to become not only the top-selling iPhone at Apple, but in the entire world.

Wow, misleading much? That statement makes it sound like it's the best selling iPhone of all time for Apple. Of course it was the best selling iPhone of that quarter as it was the latest model.

 

[Ion-X]

Don’t get me wrong, I own the most expensive iPhone that Apple has ever created (XS Max 512). But for all but the most diehard fanboys these prices are unrealistic. Apple may be the best but phones are now commodities.

 

[Wando64]

I love Apple products. In my household we have many macs, iPads, iPhones, iPods and ATVs.
However, there is just no way I would pay this much for a phone even though I am lucky enough that I could afford it.
It is simply a case of it now being worth that much to me.
I am quite happy to use yesterday’s technology for my iPhone.

 

[magbarn]

Has there ever been an iPhone release where there were *not* stories like this? Most or all have turned out to be false.

Last year it was just a few making noise about this. Now you have multiple legit news sources like Forbes and WSJ saying the same thing. Also Apples decision to hide number of unit sales is another sign that wasn’t there last year.

 

[Polymorphic]

Every. Year. Same. Stupid. Story.

But eventually, the story will be right. As this market becomes saturated, sales volume will have to decrease.

 

[Nikhil72]

When will Apple’s Board of Directores realize that Tim Cook’s greed is a threat to this company in a long-term?

Or...the market is maturing and older phones are good enough people are not upgrading in droves like before and they need to diversify their portfolio? High prices have always been an apple feature, and now if you want the newest phone, you will have to afford it. For those who can’t, the iPhone 7 and 8 are still fantastic devices at cheaper prices, and the XR is barely a bump in price for a fantastic phone. The company exploded financially in a great way under Tim, their product lineup is still doing very well, the Apple Watch conceived under him became a huge hit, so methinks he’s doing fine and the market is changing. Happens in every industry, no reason it wouldn’t happen here.

Google’s Pixel has a fantastic camera. One month into release, it’s being discounted at BOGO50 or $200 off, rumors of slow sales dog them, yet I don’t see folks calling for the resignation of product heads. Meanwhile, a company like Google has scandals both tech based and at the HR level, facebook is imploding with rampant mismanagement, Twitter can’t get their heads out of the arse, and Tim Cook is advocating for user privacy within reason understanding maybe tech has pushed the limits too far in some spheres. So fault him if you’d like, but he’s wielding his position well in my book.

 

[archvile]

Maestri said unit sales are "not particularly relevant for our company at this point,"

Until people get tired of ever-increasing iPhone, iPad, and Mac prices. The prices are increasing way faster than inflation is, so Apple must have accepted that they aren't selling as much so they have to sell for more so they can keep satisfying shareholders every quarter. Then their CFO comes out and says something like this (cocky, much?), who I think within 3-5 years will be eating these words, because the reason they are raising prices to begin with is because unit sales are down across the board. This can only go on for so long until they price too many people out of their products. What will happen when their unit sales numbers go down 10%? 25%? Will Maestri still say unit sales are not important? If they keep hiking prices like this, my bet is it's going to bite them in the ass hard in the future.

 

[MacOH21]

In past years, I would have upgraded already. But I'm still on my iPhone 7. Why? I can't fathom paying $750-$1000 for a phone. "But it's more than a phone!," you say? True. But for $1000, I can also have a really, really nice iPad Pro or trick out my stereo setup with two HomePods.

Just basic value proposition - I don't think I'm getting $1000 in benefits in a new phone above my current iPhone 7. And If I wanted those features (larger screen, faster processor, better sound) I can find that in other Apple products.

 

[Nikiaf]

This is what happens when you increase the price without adding any meaningful new features. There's zero incentive to upgrade from the X to the Xs, realistically there's not a huge incentive to move from a 7/8 to a Xs if it means breaking a carrier contract; and if you don't view FaceID as a must-have (I certainly don't).

Yes phones were always going to become less groundbreaking year-over-year, but this increasing of the price without any justification whatsoever was always going to turn people off and away form upgrading every year.