Back in January, supply chain reports suggested that Apple had asked its suppliers to cut the iPhone X production due to poor sales. The anniversary iPhone sold pretty well during the holiday shopping season, but sales began to cool off since the beginning of this year. Key iPhone X component suppliers such as Samsung and TSMC have also offered dismal guidance, sparking speculations that the iPhone X could be on its way out.
Citing a source within the supply chain, Fast Company reports that the iPhone X production has been reduced to just 8 million units in the April-June quarter. Of course, Apple will also be selling the iPhone 8, 8 Plus, and older models that would add to total iPhone sales. But it’s disappointing to see a reduction in iPhone X production. To give you some perspective, the tech giant sold 41 million iPhones in the April-June quarter of 2017.
The source told Fast Company that Apple had asked its suppliers to produce “too many units” of the iPhone X in October-December quarter of 2017, which led to excess inventory. The iPhone X production cut is aimed at reducing inventory levels at its resellers. The publication noted that Apple itself is “disappointed with sales of the iPhone X.” The company executives now believe launching a ridiculously expensive iPhone in the current market was not a good idea.
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The smartphone industry is going through a slowdown phase as the market matures. Sales in China, the world’s largest market, declined for the first time in years in 2017. Consumers are holding on to their current phones for longer, and a $1,000 device doesn’t make a good case for them to upgrade. Apple traditionally cuts back the iPhone production after the holiday shopping season. The company keeps reducing the output as the year progresses towards the September refresh.
Back in February, supply chain reports said Samsung was saddled with excess OLED production capacity due to lower demand from Apple. Samsung is the sole supplier of OLED panels for the iPhone X. In its latest quarterly earnings call, Samsung reported soft demand for its OLED panels. The Korean company also expects weak demand in the April-June quarter. Samsung also uses OLED panels in its own Galaxy S and Galaxy Note series smartphones. So, the slowdown is not entirely attributable to the iPhone X.
TSMC, which makes A11 Bionic chips for the latest iPhones, recently reduced its second-quarter revenue guidance to between $7.8 billion and $7.9 billion due to “weak demand” in the mobile sector. That’s much lower than analysts’ estimate of $8.8 billion in Q2 revenues. Austria-based AMS, which makes 3D sensing components for the iPhone X’s TrueDepth camera system, has also reduced its Q2 sales guidance to between $220 million and $250 million, which is about 50% lower than its first-quarter revenues.
Apple sold a healthy 77.3 million iPhones in December quarter. Chief executive Tim Cook told investors that iPhone X outperformed all other models in every week since its launch. The anniversary iPhone pushed the iPhone average selling price (ASP) to $796 during the December quarter. But Wall Street analysts expect poor sales in the current as well as next quarter. Citi Research expects Apple to ship only 14 million iPhone X units in April-June quarter and merely 7 million units in July-September period.
Apple seems to have realized that its insane pricing strategy has backfired. DigiTimes Research recently reported that the iPhone X successor would start at $899, down from $999 for the iPhone X. The 6.5-inch iPhone X Plus would cost $999. Apple will also launch a 6.1-inch LCD iPhone that would cost even lower. The LCD iPhone would look like iPhone X, but it is said to lack 3D Touch, dual camera, and OLED display.
KGI Securities analyst Ming-Chi Kuo has told investors that Apple would launch single-SIM as well as dual-SIM variants of the LCD iPhone. The single-SIM model is going to cost between $550 and $650 while the dual-SIM version would be sold at between $650 and $750. The price points are surprisingly attractive considering the phone would feature a bezel-less display with a notch and the Face ID technology.
All the three upcoming iPhones would run the A12 chipset produced by TSMC. The new processor would be based on the 7nm manufacturing process. TSMC claims its 7nm chips would be 40% more energy efficient and 20% faster than the 10nm processors. The iOS 12 would come pre-installed on the iPhone X (2018), iPhone X Plus, and LCD iPhone. The OLED models are rumored to feature 4GB RAM while the LCD variant would pack 3GB RAM.
Rosenblatt Securities analyst Jun Zhang predicts Apple would launch an ‘iPen’ stylus for the iPhone X Plus. The ‘iPen’ would be similar to Apple Pencil for iPads. However, the iPhone X Plus would not have a dedicated slot to house the iPen. Zhang says Apple will sell the stylus separately. Zhang believes the LCD iPhone would be the most popular iPhone this year due to its iPhone X-like design and attractive pricing.