Technology

Apple Cuts iPhone 8 Production By 50% As iPhone X Launch Nears

It’s no secret that users aren’t going crazy for the iPhone 8 and 8 Plus. In fact, many buyers see the iPhone 8 launch as an opportunity to buy the last year’s iPhone 7 at a lower price. A recent carrier store survey revealed that the iPhone 7, now priced at $549, was selling much better than the iPhone 8 in the US and the UK. Apple has little reason to maintain the iPhone 8 production at current levels. A Chinese daily claims that Apple has asked its Asian suppliers to cut the iPhone 8 production by as much as 50%.

iPhone 8 Production Reduced With iPhone X Launch
Image Source: Apple.com (screenshot)

iPhone 8 production reduced due to ‘anemic’ sales

Citing an unnamed source, the Economic Daily News claims that the iPhone 8 production cut would go into effect early next month, soon after the launch of the iPhone X on November 3rd. Apple shares plunged 1.5% in pre-market trading as investors expressed concerns over the ‘anemic‘ iPhone 8 sales. If the report turns out to be true, it would be the soonest that an iPhone production has been slashed so dramatically. The iPhone 8 and 8 Plus went on sale only about a month ago on September 22.

The iPhone 8 production cutback also means that Apple’s priciest smartphone iPhone X would rake in record sales. The 10th-anniversary iPhone with a bezel-less OLED display, a TrueDepth camera that supports Face ID, wireless charging, and augmented reality would be up for pre-order on October 27. The handset would go on sale in 53 markets on November 3rd.

The iPhone X will be difficult to find during the holiday season despite being the most expensive iPhone ever. Apple was aware that the 10th-anniversary device would cannibalize the iPhone 8 and 8 Plus sales. The Cupertino company did not reveal the iPhone 8 opening weekend sales numbers, though we can expect it to shed light on the iPhone 8 sales during its quarterly earnings call on November 2.

While Apple is cutting back the iPhone 8 production, its suppliers are still struggling to make enough units of the iPhone X. Limited availability of the anniversary model would push most of the deliveries into 2018. It means even if the iPhone sales are lower than expected during the holiday season, they would remain strong throughout the next year.

A recent Gartner study predicts that the scarcity of the iPhone X in December quarter would be positive news for the smartphone industry in 2018. Global smartphone sales have been declining since 2015. But thanks to the iPhone X, the worldwide shipments are expected to jump 2% YoY to 1.92 billion units next year. Gartner says the iPhone X sales will be particularly strong in the North America, Europe, and China.

Apple suppliers close to resolving the iPhone X production issues

KGI Securities analyst Ming-Chi Kuo has sent out his latest report on Apple to investors. The analyst said Apple would have only 2-3 million iPhone X units ready before the Nov.3 launch. In the past, Kuo and other investors have blamed the 3D sensing modules for production issues. But KGI Securities says in its latest report that Apple is facing supply shortages for multiple components including circuit boards for the phone’s antenna, wide-angle rear camera, and the 3D infrared dot projector.

However, the analyst assured investors that Apple’s suppliers were close to fixing the production issues. The supply shortages of major components should be resolved in the next few weeks, said Kuo. While the existing suppliers are resolving the manufacturing issues, Apple is also diversifying its supplier base. The 2-3 million initial shipments will not be sufficient to meet the anticipated demand.

Apple tends to sell tens of millions of new iPhones during the opening weekend. Since the iPhone 8 sales were weak and customer excitement for the iPhone X is at its peak, Apple would sell out all the units it could make. Pre-orders for the device are estimated to top 50 million units. However, Kuo has reduced his fourth-quarter iPhone X shipment estimate from 30-35 million to 25-30 million units. The analyst expects the first quarter 2018 shipments to go up by 50%.

Apple to launch iPhone X-like affordable devices next year

In a separate report, the Economic Daily News says that Apple is planning to launch a couple of affordable smartphones in China next year. These phones code-named “Lisbon” and “Hangzhou” will have the same features as the iPhone X. It means we can expect them to come with a bezel-less display, Face ID, animoji, and wireless charging. It is unclear whether the devices would be China-exclusive or would also be available in other countries.

These affordable iPhone X-like phones would help Apple regain some market share it has lost to Huawei, Oppo, Vivo, Xiaomi, and OnePlus. Apple is the fifth largest smartphone company in China, lagging behind the local vendors. Don’t expect Lisbon and Hangzhou to be mid-range or low-end devices. They will likely still be premium handsets, though they would cost less than the iPhone X.

During the iPhone X unveiling event, Apple had said that the 10th-anniversary iPhone would shape the next decade for smartphones. Apple could bring bezel-less OLED screens to all its flagship smartphones next year.