Report: iPhone XR Sales are Much Softer Than Expected

Posted on November 5, 2018 by Paul Thurrott in iOS with 40 Comments

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.

 

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Comments (42)

42 responses to “Report: iPhone XR Sales are Much Softer Than Expected”

  1. Stooks

    If true, which is a BIG IF since Nikkei has gotten this kind of thing wrong 5 out of the last 6 years or something like that, like they did with the X (tracking suppliers to comment on demand)....anyhow if true this is very bad news for Apple.


    The XR was predicted to be the smash hit of this iPhone season, outselling all the rest since is was a cheaper "X" class phone.


    With flat iPhone growth, Apple pulling future numbers, the new Macbook Air a complete joke and with the price of everything Apple going up and up and up......are we seeing Apple peak? Even if so it would be very long ride down to whatever they would end up at.


    Personally my 2017 15inch Macbook is my very last and thankfully my work paid for it.


    Apple is going to push a iOS Macbook in the future but the timing of that is super critical. They have to do it when iOS can really take over as a computer for 90% of people and sadly I can't even come close to doing my job on iOS even with a new $2300 iPad Pro. (top of the line with keyboard and pencil). If they push it too early and kill of the Intel Mac's it could flounder big time.

  2. rmlounsbury

    While the phablet has become popular in general. I wonder if Apple missed on how big of a phone people really want from Apple? It seemed odd to me that the "budget" iPhone of the X series is bigger than the high-end XS and slightly smaller that the XS Max.


    Maybe a 5" XR that was all screen may have performed better?


    Also, with the XS, XS Max, and XS Max being priced where they are and the 8 & 7 series devices still in the market and still perfectly good devices with significant savings (especially in the refurb market) people may just not want to spend $749+ for a new phone when the $699 and less devices work fine. Apple made a big to-do over saying how they are working to make old models last longer in inherently going out and tell people to not upgrade because their device is still a perfectly fine device and doesn't necessarily need upgrading.


    The impetus to upgrade might be iPhone's no longer being eligible for iOS updates rather than having the newest and shiniest.

  3. MikeGalos

    With iPad and Macintosh sales down, the iPhone sales basically being flat was Apple's "good news" in their physical product lines.


    While they've been talking about growth in their services, those services mostly, and in some cases only, are of use to people owning Apple's physical products so a collapse in those devices means a lower and lower maximum penetration of those services.


    To make matters worse, many of those services are not really competitive outside the Apple walled garden so making them cross-platform as a growth strategy is a very, very difficult road filled with lots of existing and entrenched competitors.


    It's pretty clear why Wall Street is nervous and AAPL stock has dropped 10% in less than a week.

    • Stooks

      In reply to MikeGalos:

      I read and article today that talked about Apple's "services" revenue/success. 9 BILLION of that came from Google this year to be the default search engine. Subtract that from the total and how successful is it? Next year that payment goes up to 12 BILLION!


      A couple of really scary things come from that.


      First Google is not a charity if they can afford 9 and 12 Billion just to be the default search in iOS they are making some serious money off of those search queries. Basically our data.


      Second, like China, Apple has ZERO problem with selling that to Google.....so much for their "privacy" stance which is nothing but convenient BS since all of their money comes from high hardware sale margins.


      I own a Apple phone because it is the lesser of two bad choices to be honest. I will never use a iPad to do work and I will never pay for one either. The one I have was gifted to me and its nothing but a Netflix/Hulu, Prime video, Kindle device.


      • MikeGalos

        In reply to Stooks:

        And that's $9 Billion this year and $12 Billion next year to be the DEFAULT search provider on that year's new phones and tablets which is about, 265 million total devices. That's not the fee to be locked in, just to be default. And that's with Google's dominance in search so it's not like a significant number of users wouldn't change to Google if Apple sold that default position to Microsoft or DuckDuckGo.


        That's $34 - 44 per device allowing for iOS device sales to not fall further. And that is a huge assumption seeing that's not been the case lately.


        That's a LOT of money per customer for their search history. Imagine how much money Google is making per Android user. Or per YouTube viewer. Or per desktop Google search user.

    • Jeffsters

      In reply to MikeGalos:

      Apple is doomed! Doomed I tell you!

  4. madthinus

    The Iphone 8 is a good phone and is the only one reasonably priced at the moment in our market.

  5. Jeffery Commaroto

    For a lot of reasons it doesn't look like China, India and Africa are going to deliver growth numbers for Facebook, Google, Twitter and Apple that Wall Street has been banking on. Meanwhile there aren't that many "affluent" (by global standards) people in the world capable of buying these products and sustaining the services either paid directly or through advertising. Those people already have smartphones and tablets and dwindling reasons to upgrade every year or two.


    Apple's narrative is becoming, "We have a healthy portion of the market willing to spend money. Let Google and Facebook give things away for free and spy on people to pay for it." I don't think it's coincidence that they are suddenly taking such a brash stance on surveillance. They are going to make people pay for security/privacy.


    The gamble is whether Apple can eek out a nice enough living selling luxury goods to just the upper tiers of affluent people and to college kids with student loan dollars. I imagine they will do just fine. Even if they contract in revenue and market share they now have a ton of money in the bank and have been purchasing back their stock in large quantity. They can hibernate.


    With all of that said I don't know how many years in a row now we have heard analysis of doom and gloom for Apple leading up to their earnings report. Only to find they have delivered the goods. So we will see.

  6. Chris Payne

    Sigh. Here we go again. A week after every single iPhone release there are "reports" that indicate soft sales and scale backs at production facilities. And then when Apple announces numbers they blow away everyone's expectations.


    Why do we keep going around these circles? Why does the media perpetuate these reports?


    Every. Single. Time.

    • skane2600

      In reply to unkinected:

      A company hyped as much as Apple has been by the media is also going to see the downside of it. Apple certainly hasn't had any trouble making money in recent years, but dropping first from number 1 to number 2 and now dropping to 3, doesn't IMO qualify as blowing away everyone's expectations.

      • Jeffsters

        In reply to skane2600:

        Perhaps but, until recently, the units sales were estimated for everyone else other than Apple. Yet Apple still seems to be the only one making a meaningful profit, or any at all, from their handset hardware sales.

        • skane2600

          In reply to Jeffsters:

          I'm not sure what the definition of a "meaningful" profit is supposed to be, but companies don't usually continue to make a type of product for years without making any money. If Apple hadn't considered Samsung a threat, it's unlikely they would have sued them.


          It's funny how some Apple fans argue both that Apple products aren't expensive compared to similar offerings from other companies and yet claim that Apple is the only one making money.You would expect those scenarios to be mutually exclusive.

  7. Angusmatheson

    My favorite analysis of the “disappointment” of the iPhone C was from Ben Thompson from Stretechery. He argued that the it was clearly never the new model of iPhone. Where a 4 (now 8) means that you might have bought the top of the line a few years ago and aren’t a jerk and take care of it - the C (or XR now) says I bought the cheap one. The SE avoided this by looking like a 5 - the newest. I’m not sure how true this is. It seems to me the XR seems like a great phone for a lot less. My family is one of those who “needs” to upgrade -I use a 6, my son with an SE, my wife an 6S plus. But our phones really work great. I wish we all used them less, I don’t really want to make our phone experience better.

  8. nbplopes

    I think this is great news ... hopefully. Apple needs a slap in the hand considering the rising prices in the last 5 years.

  9. provision l-3

    Jan 5th 2016 Nikkei reported iPhone 6s orders were cut.

    Dec 30th 2016 Nikkei reported iPhone 7 orders were cut.

    Oct 20th 2017 Nikkei said iPhone 8 orders were cut.

    Jan 29th 2018 Nikkei said iPhone X orders were cut.


    None of those ended up actually being accurate. So iPhone Xr orders could be cut but I'm taking the news with a grain of salt.


  10. Paul Thurrott

    This is classic "shooting the messenger." Sorry, but the reaction to Apple's decision to stop reporting iPhone unit sales was universally denounced. Apple's not doomed, that's idiotic. They're just not selling as many iPhones as expected. Sorry I have to report what's happening.
  11. aelaan

    The sooner Apple will get rid of the name iPhone - implicating it is a phone and not a smart device - the better. iPhone is so 2007 and be honest, except for adding some apps and improvements on taking selfies the development of smart devices has been pretty 'meh' over the past 5 years. I have an iPhone 7 with 128Gb storage.... More local storage than my laptop.

    Numbers from other parts of the world do not support any growth in the market segment as the cost is prohibitive and as such the Android based deliveries of lower end devices, that might be a little slower, is picking up. Xiaomi, Huawei, Blue and the likes are pumping out devices that support this shift in the market. Apple needs to come with a proper 4.7 inch device around the 400 dollar mark or they are going to be that other BlackBerry story of not seeing the market trends.

  12. YouWereWarned

    S.O.P. for retailers: Tell everyone something desirable will be in short supply for the holidays. Drives customers on the edge to commit and buy it early. Clever, huh?

  13. Jeffsters

    I guess it's gotta suck when everyone is unexpectedly buying the higher priced models!

  14. Yaggs

    The problem is there isn't enough difference between ANY of the current phones they sell. Go into an Apple store and play with an iPhone 8, 8Plus, X, XS, XS Max, and XR... do any of them really feel ANY different? The OS looks identical on all of them, right down to the same number of icons on the screens even between the smallest phone and the biggest phone. You couldn't tell the difference in performance of any of those phones just playing with them in the store... sure load up 10 apps and few games and then you might be able to differentiate them... the screens all look great, regardless of the fact that some are LCD panels. What are they upselling people on? FaceID? The Notch? Asside from those 2 things the experience of the devices are all about the same.

  15. jprestig

    I really thought the Xr would be a huge hit. I'd be curious to know the individual numbers for iPhone 8 and iPhone 8 Plus, rather than combined. If the majority of that order is the 8 Plus, then size clearly isn't the issue with the Xr. I'd think maybe it's the lack of Touch ID on the Xr and people don't feel ready to move to Face ID yet.

    • bassoprofundo

      In reply to jprestig:

      I think you're onto something with the FaceID thing. I think they underestimate the familiarity and comfort of having that "one button that always gets you back to the main screen." People that know nothing about multitasking, gestures, etc., still know that no matter how deep in they get, this one button always gets them out. Even my (relatively) young and tech-flexible wife was like "I use that button for everything. Why would they take that out after all these years? They have this big logo on the back. Why wouldn't they just put it there like the Android people do and at least give me the option?" I couldn't have said it better myself.




      • jwpear

        In reply to bassoprofundo:

        I was on a three year old iPhone 6 last year at this time and chose the iPhone 8 for exactly this reason--Touch ID. The convenience and speed of touch ID just can't be matched by face ID. My wife elected to go with the iPhone X when she upgraded this past spring. I find its use more clumsy without the home button and touch ID.


        I would have loved the larger OLED screen on the X, but I'm just not ready to move away from the home button and Touch ID. A small part of me holds out hope they'll bring it back in some form.

    • gartenspartan

      In reply to jprestig:

      I think size has something to do with it too. The most manageable one handed phone in the new lineup is the $1000 model. They made the more affordable option a phone with a screen over 6” and I think some people upgrading from a 4.7” iPhone or smaller may be turned off by the size of the XR.

  16. pachi

    Years of zero innovation and actual improvements in the phones they've released have led to this. the Xr is probably the biggest upgrade the line has had since the iPhone 6, mainly due to an actual camera improvement for the first time in years, but to revive that enthusiasm is challenging!

    • MikeCerm

      In reply to pachi:

      The iPhone Xr (as the "standard" iPhone), is the biggest upgrade in years, but it's not something that mainstream buyers want. They probably would prefer to buy the 8 at a reduced cost, because it's the same size as the 6 they've held onto for years, or they're holding out for something closer to the 5 or SE size. They want the cheapest iPhone that fits in their hands.

      • jdmp10

        In reply to MikeCerm:


        Agree. Those still with a 6 or 6s (standard not Plus) that want a relatively small phone without paying close to a grand for the privilege have the 8 as the only real option. The Xr apart from costing more than the 8, it's far larger and the size automatically makes it a no-go for someone that wants something smaller. Even if you got a refurbished X from last year which is smaller than the Xr but bigger than the 6/7/8, you'll still play around what a new Xr costs.

  17. digiguy

    Not surprised. It was even obvious. Discontinuing the iphone 8 was a big mistake. As was no more iphone se. 2 reasons: one is price, second is size. If apple thinks it can raise the bar for prices and people won't move to Android, they are only partially right. People won't move to Android. They will buy older models, or worse for Apple, they'll buy used.

    And many people (like me) feel uncomfortable with anything more than 5 inches. The Xs could still be ok as it's bezel-less, but at 1000$ or more it's too much for many. Personally I use a Galaxy S7 as my main device (the last galaxy without the gimmicky curved screen and with a camera that is almost as good as the S9) and an iphone SE as a secondary device (great little phone too, with a headphone jack). I'll be selling the essential phone, which is a nice phone, but the audio jack adapter has issues when you move it, as Paul knows well with USB C to audio adapters. And the camera is inferior to the S7.

  18. skborders

    That explains why you are already seeing sale prices/special offers on the XR.

  19. Jason Peter

    I’ve always waited until early January, which is when I’m typically eligible to upgrade. That, and I’ve never liked being an early adopter of the iPhone simply due to the fact that I would have to wait possibly weeks for supply to catch up and have our units delivered to us (my wife and myself, as well as several of our children are on the same plan, and typically all upgrade at the same time) . That, and I usually like a product to have a few months of mainstream usage under its belt to weed out any potential issues (or have them fixed) after release.

    I think many take this stance with the iPhone, and wait at least a month or two to better assure smooth sailing. I personally take that stance with any product if I’m able.


    Whatever the reason for the slowdown, if it means I have a better chance at nabbing a sale price, all the more good for me! :-)

  20. sott3

    I wonder if the price difference is enough for most people to turn down getting the "best" new iphone. If you have 24 months to pay off the phone, it's only an extra $10 per month to get the XS.

  21. Daekar

    I hesitate to say that this was obvious or to declare that the sky is falling, but it certainly is interesting. I will be curious to see if it pans out as Nikkei's statements seem to indicate.


    I personally have a strong dislike for Apple products, but I rely on them to provide a loyal opposition to the Android market. Apple going south wouldn't be good for me or anyone else.

  22. PeterC

    if they deploy 0 % interest free credit options then there's definitely too low sales numbers. I shall wait and see as I fancied an XR. Cant pass up a 0% offer if it happens.

  23. cpsterndog

    I really wanted to want the iPhone XR. I spent 3 years on an iPhone 6, which I enjoyed but never quite loved the size of it. I'm now on year 2 of an SE, which still feels great one handed.


    But I really want an upgrade with better performance, so when I went to the Apple Store last week to get the battery replaced on my SE (while the price is still discounted through the rest of the year), I tried out the XR. I love the features & the speed, and the price is right. But I just don't want a big phone and can't convince myself that I do.

  24. skane2600

    All things have limits, including the amount of money one can charge for a product. Apple has been pushing this limit successfully for a long time, but even they can't overcome the inevitable.

  25. yangstax

    Foxconn has cut down the part supplies by 10% and hinted the slower than expected sales of the new iPhones. Apple starts to face the fierce competitions from the more valuable Chinese made phones.

  26. Oreo

    I remember quite a few stories of “disappointing” iPhone sales, and so far none of them have turned out to be correct. Especially when it comes to the Xr, it is not even clear what expectations you base that judgement on. My advice: ignore all that non-sense and look at next quarter’s results. If iPhone revenue decreases unexpectedly, then something is wrong with the current lineup and Apple’s strategy. If revenue behaves as expected or exceeds expectation, then Apple’s business strategy is working.


    Keep in mind that Apple has announced it wants to be more sustainable and raised prices over the last two, three years. So if people keep their phones longer, and Apple compensates for that by increasing unit prices. Given that the iPhones’s SoCs reach notebook-level performance, I expect that to be true. I currently own an iPhone 7 and plan to use it for 4-5 years, the same cycle I have for my other computers. When I replace it, I expect the replacement to last just as long.

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