Apple’s iPhones are usually in high demand, and this year’s models were expected to be no different. However, now The Wall Street Journal claims that the iPhone XS and XS Max are not selling well, so Apple has resumed iPhone X production.
Why has Apple resumed iPhone X production?
Apple’s decision to resume iPhone X production is not to make up for the loss in the sales, but to meet the terms of its agreement with Samsung, the WSJ says. Apple’s agreement with Samsung stipulates that the U.S. firm will buy a certain number of OLED displays from the Korean firm.
Since the iPhone XS and XS Max are not selling as well as expected, Apple could lose money under the terms of that agreement. To honor the agreement, Apple has reportedly turned to the iPhone X, which is a year old and is cheaper to produce than the 2018 iPhones. Apple stopped iPhone X production after releasing the 2018 iPhones.
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The iPhone XS and XS Max are presumably not the only issues for Apple. Earlier this month, there were reports that Apple asked many of its suppliers to reduce their expectations for iPhone XR orders. Apple even reportedly told three of its suppliers to reduce production for the iPhone XR.
Apple has not said anything officially, and we don’t expect it to reveal numbers either However, the company recently revealed that it will not share iPhone sales numbers in future earnings reports. As a result, some are speculating that the numbers are so bad Apple management wants to hold them back.
The iPhone XS, iPhone XS Max and the iPhone XR have gotten positive reviews overall, but actual sales are not that encouraging. The high prices may be to be blamed, and this could be why Apple reportedly plans to discount the iPhone XR in Japan, which is one of its biggest markets.
Such things don’t bode well for the new iPhones. Moreover, the iPhone 8, which came out in 2016 and costs much less than the iPhone XR, is more popular. Apple’s decision to discount the newest iPhones is not a new thing, but doing it in the launch month is definitely rare. For now, there are no such discounts on the iPhone XS and XS Max, and even the iPhone XR discount is limited to Japan.
iPhone sales could still pick up
On the other hand, Apple optimists say the new iPhones can still make a comeback. The iPhone 5C started slow, but sales ramped up later. Meanwhile, Apple could benefit from resuming iPhone X production because last year’s model is cheaper than the current ones.
Moreover, many believe Apple has a Plan B ready, and thus, it may not feel much impact from the lower iPhone sales. The company could boost its earnings via services like Apple Music, App Store sales and other services.
More signs of slowing iPhone sales
Bloomberg claimed recently that Foxconn, one of Apple’s major manufacturing partners, plans to cut 20 billion yuan ($2.9 billion) from its costs in 2019. The Chinese company expects 2019 to be a “very difficult and competitive year,” the report added.
Foxconn’s cut includes about 6 billion yuan ($865 million) for the iPhone-related expenses, according to the news network. The company also reportedly plans to reduce about 10% of its non-technical staff and review managers.
Bloomberg’s report follows an earlier report claiming that Foxconn slashed overtime hours for workers after Apple reduced its production orders for the 2018 iPhones.
Earlier this week, Goldman Sachs lowered its price target on Apple for the third time this month due to slow iPhone sales in China and other emerging markets. Analyst Rod Hall lowered his price target from $209 to $182. Earlier this month, he reduced his price target from $240 to $222, and then on November 12, he slashed it to $209.
“In addition to weakness in demand for Apple’s products in China and other emerging markets it also looks like the balance of price and features in the iPhone XR may not have been well-received by users outside of the US,” Hall said in a note, according to Bloomberg.
Year to date, Apple shares are up more than 4%, while in the last month, they are down almost 20%.