Report: iPhone XR Sales are Much Softer Than Expected

Apple’s new iPhone XR has apparently gotten off to a slow start. So Apple is canceling plans to boost production over the holidays.

The report, in Nikkei, states that demand for the iPhone XR has been “disappointing.” And as a result, Apple’s suppliers have canceled plans to ramp up production of the device. And will instead supply Apple will far fewer iPhone XR handsets than originally expected.

Key data from the report includes:

• Apple has told its top smartphone assemblers—Foxconn and Pegatron—“to halt plans for additional production lines dedicated to the new iPhone XR.”
• Foxcomm originally planned to use 60 production lines for the handset but will only use 45 now. As a result, Foxconn will build 100,000 fewer units every single day than would have happened under Apple’s original order.
• Other iPhone manufacturers face similar issues. They are “suspending plans to ramp up production and awaiting further instructions from Apple.”
• Apple had asked Wistron, one of its smaller manufacturing partners, to “stand by” in case iPhone XR demand exploded. But Wistron now expects to “receive no orders for the iPhone XR this holiday season.”

Tied to this is the unexpected news that demand of the previous-generation iPhone 8, which Apple still sells, has jumped. These phones are about 20 percent less expensive than the iPhone XR.

“Suppliers of iPhone 8 and iPhone 8 Plus are getting a combined order of around 5 million more units,” one source told Nikkei. The publication notes that Apple had previously planned 20 million units for the older iPhone models this quarter, but raised the figure to 25 million units.

This information may help explain why Apple provided a dim forecast for iPhone sales in the current quarter. With more customers choosing less expensive and older iPhones, Apple will have trouble raising the average selling price (ASP) of the device lineup, in keeping with its new strategy, which I call “Apple Jacks.”

This, combined with the rapid rise of China-based handset makers like Huawei, may also help explain why Apple will no longer provide iPhone unit sales figures: The firm is no longer the number two player in the smartphone market and may fall to number four or five in the coming year by unit sales.