Amid reports that the iPhone XS and XR have failed to meet Apple's expectations in terms of sales, we're now hearing from The Wall Street Journal that the tech giant has cut its production orders for both phones.
Predicting exactly how many phones you're likely to sell isn't an easy exercise, even for a company the size of Apple, but it would seem that the drop in demand here is quite striking. It is thought that iPhone XR production has been reduced by as much as a third, and that Apple may even have reduced its orders more than that. For the XS and XS Max, the impact is less dramatic, which rather flies in the face of industry opinion than the iPhone XR would be Apple's biggest-selling phone in 2018.
According to The Wall Street Journal, this drop in orders may not actually hurt Apple all that much. The company continues to sell a healthy number of older-model iPhones, and is also backed up by a growing 'service' business which includes the App Store and iTunes, as well as its production of other devices, such as computers. Also, the average selling price of a new iPhone has risen over the past year, which means Apple effectively can make the same profit from a smaller amount of sales.
The problems occur when it comes to suppliers, who are constantly having to contend with Apple's changing demands. According to one source which The Wall Street Journal spoke to, "doing business with Apple is very risky as it often reverses what it has promised”. Last week, we reported that suppliers who make parts for the 2018 iPhones were having to deal with reduced orders, which therefore impact their revenue projections.
Such news should obviously be taken in the wider context of the market; Apple may be cutting orders, but it's still going to sell plenty of these phones – last year, production of the iPhone X was slashed yet it went on to become the best-selling phone of 2017. It would seem that Apple is perhaps a little optimistic when it comes to predictions.
However, the company is clearly changing the way it does things; it will no longer report device unit sales as part of its financial quarterly releases, which means we won't know how well the XS and XR have done when the company releases its report at the start of 2019. That suggests that things are not entirely rosy within the firm.
Does Apple have anything to worry about? Apart from the slight wobble on the stock market, we're not sure it does. The XS and XR will no doubt sell well, and the company continues to make so much money it doesn't know what to do with it. However, one lesson here relates to the importance of suppliers; Apple may produce the A12 chipset which lies at the heart of its 2018 iPhone range, but it currently cannot produce all of the elements inside the phone. It needs to make sure it doesn't annoy its valuable suppliers too often, or it could find itself at the back of the queue behind many of its smartphone rivals.
by dmcferran via Featured Articles
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