People’s obsession for the latest iPhones seems to be dwindling as quickly as it rose when the phones were first launched back in September. And Apple is making no attempts to mask this fact. According to a report by Wall Street Journal, Apple is cutting down on its production orders on the latest line-up of iPhones owing to lower than expected sales.
And considering Apple’s own outlook, various hardware suppliers have lowered their profit estimates. Screen maker Japan Display Inc cut its full-year outlook citing weaker smartphone demand, while British chipmaker IQE Plc said it expects a significant reduction in its financial performance in the current year. Lumentum Holdings Inc and AMS AG (companies that provide software needed for iPhone’s FaceID technology) also lowered their forecasts. Apple had a 3.7% drop in its shares on Monday, while its supplier’s experienced drops in shares ranging between 2.7% and 6%.
Apple hit troubled waters especially with the iPhone XR, on which the company had pinned rather large hopes of selling, given the $250 price tag and the slew of attractive colours it was launched in. Reports further suggest, that Apple apparently would be cutting down the production of iPhone XR by up to a third of the 70 million pieces they asked suppliers to initially manufacture. This is expected to cause disruptions along the supply chain with chipmakers like Western Digital (WD) and Micron Technology Inc expecting to take a hit in their share values as well.
While this may seem troubling, it could turn out be a revenue-gaining strategy by Apple, as lowering in demand is countered by their higher prices, thereby generating larger revenues. Something similar happened last year when the Cupertino-giant came out with the iPhone X. In spite of people showing skepticism over its hefty price tag and not so stellar sales, it turned out that Apple indeed witnessed an 11% increase in revenue from the sale of the iPhone X.
However, a rather sharply growing market presence of makers like Samsung, One Plus and Huwaei — all of whom are offering Android flagship alternatives to the iPhone, it is yet to be seen if the high prices of the devices would be sufficient to tackle a drop in demand for the iPhone XS and the XR and drive the company forward in terms of revenue.