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

[archvile]

Their profit margins have remained largely the same. Production costs have risen which has led to MSRP rising. It sucks, but it hasn't just been because Apple is evil and greedy

How would production costs have risen if they are selling less and less number of units?

 

[BeefCake 15]

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.

I did the battery swap with the 6 and it still was too slow and laggy, T-Mobile gave me $250 for it and got the Xr instead.

There are multiple indicators that this year is different. Apple announcing they're not revealing unit sales anymore. The XR not selling out pre-orders at all.

The AW sales numbers were not revealed at first and everyone thought because of low sales and it's failing....knowing Apple, they're more likely to do this as a precedent of not revealing unit sales for products that are more likely to not sell (MacPro)

 

[nt5672]

Need to cut the price & innovate better

I disagree, they need to cut prices and stop calling minor engineering improvements, "Innovation". A phone is a phone.

They need to provide sizes that support a broad range of needs, like the SE.

They need to get rid of Ive and allow sizes that let one get through a busy day without charging the phone. Which is not possible if you use the innovations Apple wants credit for.

If they are going to make gaming hardware, then make gaming hardware across the line. Quit pretending that super performance phones are phone innovations.

Its too bad that Apple forced most pros to leave the brand. This is just the situation that Pros would have stepped in and helped Apple through. They did it for Jobs and would have again, except they were all tossed out on the street for teenager fashion purchasers.

I know for the last few years I no longer recommend Apple products to family and friends. Apple has left me hanging too many times.

All of my friends/family that have Apple phones have SEs, except for the teenagers that would throw a fit if you bought them a functional devices over a fashionable device.

 

[trip1ex]

every time an iphone launches, these reports surface a short time later.

 

[Rogifan]

Well the iphone 6 was the latest iphone which was very difficult to get. All other models (for sure the X models) aren't even sold out in the preorder here in Europe

So? That doesn’t prove this rumor or any of the others were accurate. The media reported all these rumors of very weak X sales and yet on every earnings call Cook said it was the best selling model for each week in that quarter. These supply chain rumors don’t tell us squat about actual sales. Even if they’e true it doesn’t necessarily mean weak sales. We know nothing about Apple’s supply chain and why they order what they do in the quantities they do from various suppliers.

 

[Scottsoapbox]

But wait, I thought they cut XR production because the XS was selling so well.

 

[groadyho]

TV Adverts? Oh how quaint. Do they still have them? /sic
I can't remember the last time I saw any adverts let alone any Apple ones. There again, I never watch TV unless I've recorded the programme first and then I skip over the ads.

So many macbook air commercials were on yesterday. Still not buying one

 

[840quadra]

I just think it is odd that for the most part, flagship smartphones have essentially kept being the same price over time. Figuring inflation, the X and newer Xs phones jumped ahead of that a bit, but overall are inline with what people would have paid for the original iPhone once their contract was up. Flagship Android phones are essentially doing the same thing, though their base prices continue to be lower and some have more features than any iPhone.

Curious how long the market will accept this. I am personally starting to consider more midrange devices as they (like laptops did since they were invented) are starting to cover all the bases I am after in a smartphone. Sure, I love flagship cameras, and processor speed, but those are all starting to get good enough for my needs.

 

[gsurf123]

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!

Of course cutting the price would sell more, but then it is a race to the bottom and that is not a race premium companies want to be in.

 

[Yazooble]

Good. Maybe Apple will learn the lesson that you can't just keep raising the prices. At some point, you make your products unreachable by a tremendous swath of middle class Americans and you shoot yourself in the foot. For the same reason, you can't just raise taxes an unlimited number of times -- you'll eventually end up with less money coming in.

Remember folks, when we heard that Apple was going to be more aggressive with prices to increase units sold? Remember that? What happened to that? Remember: we were going to get a less expensive MacBook Air, a less expensive (but not gutted) iPhone, etc. Instead they took the other approach.

Apple, here are the prices you should have gone with to maximize units sold and revenue. It could have been a banner year for you.

iPhone Xr: $599
iPhone Xs: $799
iPhone XS Max: $899

128 GB: +$50
256 GB: +$100

 

[Mackinjosh]

Step 2: Cut prices dramatically.

 

[chumpy34]

I didn't read through all of the comments so not sure if this was addressed, but I also think one of the reasons for the lowered demand is the fact that "most" people do not see these "new" iPhones being all that new. They see similar form factors with a few highlighted differences like Face ID, OLED screen, etc. but have no idea what these features are or do and are quite content to stick to their old phones. If Apple would diverge and come out with new iPhones that have a different form factor I think that would get more people to upgrade.

Another note, my gf's two kids, one in college and one in high school both have older model iPhone's with cracked screens. I keep asking them if they want those fixed and both say no and all their friends have cracked screens too. I am beginning to think it's "cool" to have a broken phone these days

 

[Princejb134]

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.

what competition though? i prefer IOS over android so theres 0 competition right now

 

[Yazooble]

Of course cutting the price would sell more, but then it is a race to the bottom and that is not a race premium companies want to be in.

Or they could have not raised prices to a ridiculous degree. They could have touted amazing new features at last year's selling price.

 

[Substance90]

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

I'm just wondering how would it be the top selling iPhone in the entire world but not at Apple or vice versa? Those two mean the same thing so "but" in between is not needed.

 

[imola.zhp]

Would have replaced a 7+ and two SE's with an XS and two XR's respectively if the prices were not just absolutely insane.

Walmart is running a $300 gift card for black Friday, which is tempting as we need a new TV for the guest room, which I was probably going to buy from Walmart anyway...

 

[Ebok]

Good. Maybe Apple will learn the lesson that you can't just keep raising the prices. At some point, you make your products unreachable by a tremendous swath of middle class Americans and you shoot yourself in the foot. For the same reason, you can't just raise taxes an unlimited number of times -- you'll eventually end up with less money coming in.

Remember folks, when we heard that Apple was going to be more aggressive with prices to increase units sold? Remember that? What happened to that? Remember: we were going to get a less expensive MacBook Air, a less expensive (but not gutted) iPhone, etc. Instead they took the other approach.

Apple, here are the prices you should have gone with to maximize units sold and revenue. It could have been a banner year for you.

iPhone Xr: $599
iPhone Xs: $799
iPhone XS Max: $899

128 GB: +$50
256 GB: +$100

If that’s what prices were then phones would be out of stock still.

Apple put themselves in this hole. No one wants to spend $1200 for a new phone every year.

 

[citysnaps]

Need to cut the price, not the orders.

Need to pay close attention to:

"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."

and

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

 

[MNJohn]

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: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

Maybe almost everyone who is willing to pay $1000, or more, for a cell phone that will be obsolete in a few years already has one.....

 

[archvile]

1. consumers keep existing hardware beyond the two-year cycle
2. competition provides a palatable, albeit imperfect, alternative

I agree with everything you said, however these 2 points stood out to me.

The fact that 1) iOS 12 was designed to enhance performance of older devices, and 2) the A12 (and really the A11 as well) perform so damned strong, almost Intel CPU level, tells me that consumers will be keeping these devices for longer than the typical 2 year period.

Regarding competition... In the US at least, It really feels like a 3-way between Apple, Google, and Samsung (which as we know, runs Google's software). Google is a strange opponent because they don't care about unit sales, or the best hardware, or stainless steel designs; no, they care about getting users into its ecosystem. Which kind of plays in well with Samsung, which by running Android, also plays into getting users into Google's ecosystem. However, Samsung has a more vested interest in focusing on hardware and their own Samsung ecosystem.

That being said, neither of those 2 alternatives provide the integration of hardware/software/services that Apple offers, at least in my opinion. Now, I use a Pixel 2 XL as my work phone, and an XSM as my personal phone (yes, carrying around 2 big phones is kind of a pain, but oh well). I've used Apple devices personally since the original iPhone, cheating with Android a bit here and there but the last 5 years have been strictly Apple. In continuing to also use Android on a daily basis, I can easily see the disparity in software quality between Android (9.0 Pie) and iOS devices.

There are so many... inconsistencies with Android, it makes iOS feel so much more professional and polished. I know people say iOS feels inconsistent, especially since iOS 7, but you haven't known inconsistency until you've used Android. Market fragmentation, device fragmentation, software fragmentation, etc will never enable them to become a palatable alternative to (most) current Apple users. Which will then feed back into device retention, which in turn feeds into keeping existing hardware longer. Which will in turn leads to ever increasing prices in order to keep shareholders happy.

So the short of it is, Android's displaced attempt at being a competitor to Apple, really only helps Apple in the long run. Competition is great, huh?

 

[ka-spot]

really do not understand why should I upgrade my iPhone 6 with bigger and more fragile/glassy whatever-the-current-number-is iPhone? I'm even considering the 5 SE... as a smaller device with less glass

 

[Radon87000]

I wonder if Apple will ever realize that their price points are getting too high for some consumers.

They already did. That's why they have decided to hide their unit sales. As said by Steve Jobs himself, if someone is hiding the sales, it means the product is not doing well.

 

[MNJohn]

Maybe almost everyone who is willing to pay $1000, or more, for a cell phone already has one

 

[Mimiron]

Well, they’re outpricing us from buying their products so what did they expect? I’ve got no reason to upgrade from my X. The price is ridiculous and no new features have been added. Phones have come to a point where they cannot offer anything new, really. I couldn’t care less about a slight camera bump. The X does excellent photos. For such a premium price, I’d like to see new features like a notch-less design, all-day battery life and so forth.

Their pricing model and product segmentation are cannibalizing phone sales. XR entry model costs 869 EUR, whereas last year's iPhone X costs 949 Eur. That's an 80 EUR price difference and everything's better about the X. I get it that someone might want a new color option, but they are really hurting themselves.

The same goes for the new MacBook Air. They can't expect high sales when they increase the price of their entry-level MBA by 400 Euros.