Apple Inc. is reducing production of the iPhone X by 50% through March 31st due to weaker than expected demand.
Plans are for Apple to create 20 million iPhone X handsets in the first quarter, down from about 40 million originally planned. Others familiar with Apple are already reporting that component orders for the iPhone X have been decreased by 60%.
Apple has declined to comment on the current news, but analysts do still expect the company to report total iPhone shipments have increased 1.5%. This includes iPhone 6, 7 and 8, according to FactSet Research.
Apple investors were hoping that the iPhone X would drive stock prices up, especially since the $1,000 price tag should have increased revenue by almost 50%, but with recent news it looks like the only thing being raised is investor concern.
Apple was hoping to make a splash with the iPhone X, riding the coat tails of the iPhone’s tenth anniversary and including new features such as a sharp organic light-emitting diode display and facial recognition. Due to the new features, Apple had to set the price high to preserve margins.
Unfortunately, incorporating the new technology led to delays in manufacturing and Apple had to abandon the use of fingerprints as an option to unlock the phones.
To add insult to injury, some consumers have said they don’t believe the features justify the iPhone X’s high price. Further complicating things, Apple decided to release three new devices, meaning the iPhone X competed for sales with the iPhone 8 and iPhone 8 Plus. Those two devices, which start at $699, are pricier than past models, but nowhere near the iPhone X price tag.
To further increase the disappointing performance of the iPhone X, some customers have turned to older, less-expensive models such as the iPhone 7 and 7 Plus. Not the worst thing in the world for Apple being the older models are cheaper to produce and generate relatively high margins per unit, but image is everything, right?
Can the iPhone recover from the X debacle? Only time will tell, but one thing is certain, whatever Apple plans for the next iPhone release, it needs to be leaps and bounds better than face recognition.