Report: Apple Orders Second Round of iPhone Cuts

Posted on November 28, 2018 by Paul Thurrott in Apple, iOS with 41 Comments

The bad news keeps piling on for Apple. Now, Digitimes reports that the firm has ordered a second round of iPhone order reductions from its manufacturers.

“Apple has reportedly enforced a second wave of order reduction in the wake of weaker-than-expected sales for its new iPhones,” the Digitimes report notes. “Many other Taiwan supply chain partners are beginning to feel the pinch in November … An iPhone assembler has also advanced its workforce trimming project, seeking to reduce personnel cost and other expenses to counter the greater-than-expected reduction of orders.”

Digitimes has a spotty record, for sure. But Apple has been stung by a series of sales setbacks related to the new iPhones—the iPhone XS, XS Max, and XR—none of which have apparently sold as well as Apple or its partners expected. There’s simply too much evidence here to overlook what’s happening.

And there’s more evidence of soft iPhone sales than what we’ve reported so far. Apple is now offering better trade-in deals when customers upgrade to a new iPhone. And the firm dropped the price of the iPhone XR by $100 in Japan.

Apple’s next earnings report will be interesting. The company has already warned that it will not disclose unit sales for the first time. But the language that Tim Cook and other Apple executives use will be very telling. In the past, Apple has always described “record” iPhone sales. This time, they’ll need to search for another success metric, much as Microsoft does in its own vaguely-reported earnings.


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Comments (42)

42 responses to “Report: Apple Orders Second Round of iPhone Cuts”

  1. lvthunder

    So your running with a story from a outlet with a spotty record? I guess that's what news has come down to these days.

  2. glenn8878

    OLED is a premium most can't afford. Go back to $800 price point for LED iPhones without the notch, keep TouchID.

  3. John Craig

    Next earnings report..."we've had a cracking quarter. We sold several dozen beats earphones and two, yes, you heard that right, two watches. But, we thought we'd leave the best till last.....8 new music subcribers!! God, we're awesome, and humble. We nailed it. Phones? Oh, yeah, erm were not doing phones anymore." :)

  4. bluvg

    Raise the price significantly and expect the same sales? That's Apple hubris thumbing its nose at calculus. Perhaps they should pull an original iPhone mea culpa and drop the price after launch.

  5. PeterC

    The question, if there is one, is which territory/region(s) are sales "potentially" declining in, its not across the board sales declines. iphones, like any branded phone, are cheaper in some regions/countrys than they are in others. Some regions are expensive, some not when compared to others.

    Its my understanding that iphones are cheapest in the US, Canada and Japan. China was once kinda break even point (not any more) and Europe is more expensive but India is the most expensive. The Indian Rupee has lost quite a bit of value against the dollar this year and India is MASSIVE growth market for apple in terms of potential new customers - but not at these forex rates. So projected sales here will suffer from foreign exchange fluctuations. The same issues apply to China now too ... in another market where Huawei et al, can pop a cheap phone out at will to a HUGE market, without the foreign exchange currency issues.

    Apple iPhone supplier cutbacks are in part some market saturation, like Japan?, but they most surely tracking these global currency and trade issues. apples problems arn't really sales declines caused by a lack of interest/desire/want/need etc etc ..... they're more a result of, well, your countries political and trade strategy affecting currency valuations and product prices around the world. I'll duck behind my sofa now and see how many downvotes I can accumulate. BUT, have a think people, just take a breath and have a think about cause and effect. Apples production cuts are an effect of currency issues hurting projected sales in the biggest markets of India and China ….

    apple bashing is fun for some, I get that, but i'd suggest people take a moment to think about what is causing apples and other US brands problem, it may be a little uncomfortable once you see it.... But hey weve got Brexit over here and that's even more bizarre!!

    Anyways, roll on Q1 and lets see what revenue apple posts. If its a drop is it a declining brand champion or a result of shall we say, national decision making.... but more importantly which region posts sales declines and how did currency fluctuations play into that region?

    (oh and its most certainly affecting other US brands too, loads of them) Right ive put my crash helmet on. Ready.

  6. Daekar

    Hmmm... well, if this is true, I hope the cuts aren't too extensive. We need a strong Apple to stand as the loyal opposition to Android, and if they start going downhill the Android experience will get worse, not better. As much as a two-OS system is bad, a single-OS system would be worse.

  7. provision l-3

    Just so I understand the narrative being pushed:

    1. Apple stopped reporting unit numbers to hide that unit sales are going down.
    2. Apple raised prices to meet revenue expectations in the face of declining sales.

    I think I got that right?

    So now Apple has not one but two production cuts because the products aren't selling as well as Apple had expected. Apple's guidance for the current quarter is minimum of 89 billion revenue. Apple hasn't re-issued guidance or issue a profit warning for the current quarter. This is particularly odd given that unit sales are falling and the new higher prices products have failed to sell as well as projected.

    I'm curious how Paul squares these two things? Does he think there is a sleeper hit product in Apple's line up? Does he think Apple leadership is unaware of these sales shortfalls? Maybe he thinks Apple leadership is risking SEC violations in hopes that the quarter will turn in the final few weeks? Maybe he thinks they plan to just lie and say they met their quarterly guidance?

    • MikeGalos

      In reply to provision l-3:

      The other option is that every Apple supplier is cutting production and laying off staff despite sales being on target.

      I'd remind you that Apple isn't bound to change guidance on a daily basis. They can issue a single revision before quarterly reports rather than issuing one every few weeks. There hasn't been a massive incident that would force a report, just a gradual below-expectation sales level and Apple could easily argue that they considered it likely that sales later in the quarter would cover the dip for a specific few weeks.

      • provision l-3

        In reply to MikeGalos:

        That first paragraph doesn't make much sense nor is it even based in fact. Apple suppliers are cutting production even though demand is as expected? Also, 4-5 suppliers of Apple's 200+ have announced a material impact. I am not sure where you got "every Apple supplier".

        You are correct that Apple isn't bound to report guidance daily. They are obligated to issue a warning when they know they will miss their guidance for the quarter. On the 19th Paul reported that the new phone production was cut by 30%. So this cut would be on top of a 30% cut. That seems like more than gradually coming up short.

        Anyway, it sounds like you are going with a mix of Apple is just in denial about the massive cuts they made or they being intentionally dishonest theories.

  8. YouWereWarned

    Ordinary market behavior is questioned as "fake news" is assumed because reality isn't interesting enough anymore.

    They simply cost too much. Sell them for $500 and you'll have your proof.

  9. NT6.1

    They really thought they could milk the hell out of their customers with the iPhone huh?

  10. red.radar

    Its hard to ignore the early discounting. I just bought two of the latest Iphones, but I did it by transfering carriers through a buy one get one "mostly" free deal. So I didn't pay full price and its also very early. Typically discounts don't start happening till Q1 after the Holiday rush.

    While the source of this round of info could be a parrot effect for clicks. The point Paul is making is still valid. There are indications the market is shifting. My next question if it a macro effect or has apple specifically done something wrong.

    • wright_is

      In reply to red.radar:

      Our company has used iPhones pretty much exclusively up until now. Only the IT department has chosen Android phones up until now. But the company only pays a certain amount of the subsidy for a new phone - therefore the most common phones in use in the company are SEs, because the smallest one fell within the limit. Now that the XR is the cheapest "new" phone and it is way above the entry point, I expect to see more and more people either holding onto their old phones or going for Android models or older iPhones when they get to renewal time.

      I can get a Hauewei P20, Mate 20, Samung Note 9 or Galaxy S9 within the budget, for the XR I would need to currently pay 80€ out of my own pocket. The Xs 64GB would be an additional 300€, the Max 400€. I don't see most employees dishing out that sort of money for company property. The X is still available from our carrier and would also be 80€. Interestingly the iPhone 8 64GB has plummeted in price to just 80€ on contract, when I got my P20, the iPhone 8 would have cost me around 250€, the 256GB version is just on our limit.

  11. chrisrut

    Nothing begets failure like bad news.

  12. RobertJasiek

    Supposing the reports are right, reasons include:

    • the maximum average price has been surpassed,
    • even if 50% accept the notch, it is not a feature that all will ever accept,
    • previous iPhones are good enough so many keep what they have, buy them or buy them used,
    • that all new iPhones are medium to large does not mean that people preferring new small iPhones would swallow the pill of buying larger than they want,
    • the competition has become good enough for many tolerating Android and maybe some compromise,
    • some Apple myths are debunked in the perpeption of an increasing number of people, e.g. extra-expensive repair does not support a myth of being exceptionally customer-friendly.
  13. coreyp

    Maybe there really is going to be reduced demand this year but the same analysts and publications saying that this year will see reduced demand for the XS/XS Max/XR said the same thing last year about the X and the year before that with the 7, and so on. In each case they were wrong so I simply can't see these same organizations being right this year with their track records being wrong for the past few years.

  14. RM

    That is great news, maybe they will stop creating phones at higher and higher prices!

    • MikeGalos

      In reply to RM:

      Or, at a minimum, they'll recognize that removing features people actually use (analog headphone jack, home button) aren't a justification for charging more.

      • dontbe evil

        In reply to MikeGalos:

        we'll how long they can keep selling overpriced and underfeatured devices ... they're pushing too much... even if apple fans are so blind to be milked there is a limit

        • MikeGalos

          In reply to dontbe_evil:

          And then brag about Apple profits to take pride in just how much they've been milked.

          • Gregory Steeno

            In reply to MikeGalos:

            Oh, Christ. Here we go again. Always a critic, never objective. Not sure what Apple fan screwed you over.

            I happen to buy (mostly) Apple products because they are of high quality, work well together, integrate with my family's life, have the best mobile ecosystem, and top notch support. Never once have I felt "milked".

            I fully appreciate a good, snarky comment, but your sweeping, negative generalizations are just tiresome.

            • MikeGalos

              In reply to SteenMachine:

              What's not objective that you're objecting to?

              That Apple has removed features people use? That's why it was called "brave" by their own admission.

              That their products have a much higher profit margin and users buy them anyway? They brag about that.

              An objective fact you don't want to be true is still an objective fact.

              • Gregory Steeno

                In reply to MikeGalos:

                First, Apple has removed features that people use. They removed the floppy drive from the first iMac, never incorporated flash with iOS hardware, etc...I didn't claim otherwise. Were they painful on occasion? Yep. Did we evolve past those decisions? Yep. But my comment wasn't on this point.

                Second, Apple has impressive profit margins, I don't dispute that. And as a shareholder, I say "good". But some of the margins come from optimizing their vast supply chain; Google and Samsung haves $1000 phones as well, and Apple doesn't play in the budget end. My primary comment was that I don't feel "milked" after purchasing a product for the reasons above. (Nor do I or anyone I know ever brag about the margins.)

                My secondary observation was that you are clearly perpetually bitter with Apple, who ignited the industries we vigorously read and debate about, and folk who happen to enjoy their products. Not sure why.

                • MikeGalos

                  In reply to SteenMachine:

                  And what of those statements that I made was not objective?

                  For that matter, which of your "observations" are objective?

                • NT6.1

                  In reply to SteenMachine:

                  Stop with this nonsense. Flop disks were replaced by better and easy to use tech. CDs and USB flash sticks had more storage and were more durable than floppy disks. The headphone jack still has superior audio quality and is easy to use. Just plug it in and you're done. Bluetooth requires more steps to set up and you have to charge its battery. All so you can have unreliable playback with lower sound quality.

                • curtisspendlove

                  In reply to NT6.1:

                  Interesting how many people I see walking around with wireless earbuds.

                  Most of them aren’t Apple AirPods, by the way.

                  Maybe some people prefer freedom from wires over “high fidelity”.

                  I know I do. Wireless audio improves with every iteration.

                  A wire is a wire and is always inconveniently in the way.

          • MutualCore

            In reply to MikeGalos:

            I never understood the Apple fans bragging about the profits. As if they were major shareholders and they were getting back some gigantic dividend or something. Nope, just score-keeping to rub it in the faces of Microsoft fans, especially Windows Phone fans.

  15. Yaggs

    It's odd to me that the XR isn't doing as well as they thought... If you want to get into the "new form factor" for the iPhone it is by far the least expensive way to do so. If you saw the XR by itself without comparing it to the XS you would think it was the flagship iPhone. Every iPhone before the X had LCD screens... no one thought they were terrible... the XR is a fine device for a reasonable price, especially considering the insides and camera sensor are the same as the XS.

    • wright_is

      In reply to Yaggs:

      But for us it means investing a minimum of 300€ out of our own pockets for a company owned phone... The subsidised carrier price is around 600€ on the contracts we use and the company pays a maximum of 300€ towards the phone. The iPhone 8 64GB is now only 80€ on contract.

      Go figure which phone most people will chose when replacing their company phones.

    • orbsitron

      In reply to Yaggs: I don't think it's the screen that's the issue here. I think it's a combination of a very expensive upgrade (even if it is the least expensive of the new lineup) and the fact that some don't consider features like FaceID replacing TouchID or the lack of bezel, as an upgrade, they view them as downgrades.

      A colleague at work was very hesitant to upgrade from her iPhone 8 because none of the new options have bezels or a home button. She _loves_ the home button and feels confident that holding the phone on the bezel near the home button won't inadvertantly cause soemthing to happen. Even if Apple has addressed those issues with careful touch calibration/gesture recognition, it's the _feeling_ of insecurity that makes those "features" feel like a burden instead of a benefit. Add to that the expensive barrier to entry, and more people than in the past are just not interested this year.

      I would love to see an iPhone that has both FaceID _and_ a front-facing fingerprint reader (even if it's an in-screen reader). If the fingerprint reader is in-screen, then I think Apple would do well to include a software home button in the middle of the dock (similar to some Android designs), to also ease the transition to a gesture-based navigation model. If the XR had those features and was $100 less expensive, I think it would be selling far, far better than it is.

    • red.radar

      In reply to Yaggs:

      I have an XR and and XSMAX. What is striking is how when you put a case on it, most wouldn't know the difference. I will appreciate the marginal improvements...but I don't think most would appreciate the price increase for those marginal improvements.

      The iphone XR is an interesting device in that it makes you feel like your getting a 1000 dollar phone but your paying 750. So you leave with this sense of value.

      And the notch is a none issue for me. Going from a 8 to a X series. I appreciate the increase screen realestate so much. Its like "wow" when i put the XR net to my 8. Suddenly I don't mind the notch.

      I am sort of surprised that the Xr is not selling better.

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