Apple has cut production order for the iPhone XS and iPhone XR, according to suppliers
November has not been good for Apple, and it may get worse. Soon after analysts predicted that sales of the iPhone XR would fall dramatically over the next few fiscal quarters, Apple component suppliers have now confirmed that Apple has reduced orders for both the iPhone XR and iPhone XS.
According to the Wall Street Journal, Apple may have overestimated demand for this year’s smartphones. A large part of the reduction in sales is being blamed on China, where smartphone demand has sharply fallen, at least for Apple products. This may also be due to U.S. President Trump’s war and retaliatory tariffs levied by the Chinese government on American goods.
There is a bit of a silver lining. The average sales price for an iPhone has also gone up. Considering the cheapest new iPhone starts at US $750 and goes up from there, Apple shouldn’t have to sell as many units to turn as large a profit as it has in the past. However, this does present some risk to suppliers. An anonymous supplier told the WSJ that “doing business with Apple is very risky as it often reverses what it has promised.”
In other words, Apple may promise a large order from a supplier only to pare it back a few months later. The supplier is then left in a lurch, possibly with stock that is left unsold to Apple.
There is another possibility. While Apple may have overestimated demand, as it did with the iPhone X at launch, the Cupertino giant may also be controlling supply in order to artificially raise demand. In today’s smartphone market, fewer and fewer consumers are chomping at the bit to upgrade every year. This year’s iPhones were met with a decidedly lukewarm reception, so Apple may be cutting orders in order to increase scarcity in an effort to make the iPhones seem in higher demand than they really are.
Of course, it is entirely possible that Apple made promises based on poor sales predictions and is now forcing its suppliers to eat that crow. Since Apple will no longer report device unit sales in its quarterly financial statements, we won’t officially know how well the iPhone XR and iPhone XS sell.