Apple is planning to cut iPhone X production by half for the first quarter of this year. The Cupertino-based iPhone maker is cutting production from the previous target of more than 40 million units.
According to Nikkei Asian Review, Apple had planned to expand iPhone X production to more than 40 million units at the time of its release in November. However, the company has now notified its suppliers that the production target has been cut to around 20 million. The report says the cut in production is primarily due to the slower-than-expected sales during the holiday season.
Canalys estimates that Apple sold around 29 million units of iPhone X at the end of December, which is a strong number despite the production issues affecting the supply of the new model to carrier-centric markets. Nikkei notes that iPhone did not see strong sales in key markets such as Europe, the US and China.
Apple iPhone X is the first major redesign for iPhone in nearly four years. It is also the first iPhone to feature an OLED display and facial recognition system called Face ID. While it brings new design and security features, it starts at a steep price of $999 in the US (or Rs 92,430 in India), which makes inaccessible to a lot of consumers. At the time of its release, it was acknowledged as a great product that lacks any of the cutting-edge feature not available on rival device or platform.
Due to lackluster response, Apple could now delay the introduction of OLED panels on other models this year. The iPhone X initially faced production issues due to delayed component deliveries but rising inventories has forced the company to slow down its production instead.
Apple is expected to maintain a total production target of 30 million units for iPhone 8 and iPhone 8 Plus, which lack the modern design of iPhone X, and are priced lower. The details regarding production cut comes just days ahead of Apple’s quarterly results where the company is expected to post record profit due to strong first wave sales of iPhone X. However, the analysts would be looking at company’s guidance for the next quarter, which would indicate whether iPhone X sales are slowing down.
Earlier, KGI Securities analyst had predicted that Apple will cancel iPhone X mid-year if the sales don’t pick pace in the next quarter. Apple cutting down production of iPhone X will also affect company’s suppliers, who have been pushing the boundaries with remarkable feat of engineering. The cut in production will affect Samsung Electronics the most, which is currently the sole supplier of OLED panels used on iPhone X. According to IHS Markit, the Samsung-made OLED display is the most expensive component inside iPhone X.
Other than Samsung, the cut in production will also affect chip maker Murata Engineering, Sony’s image sensor division and TDK, which supplies batteries for the device. The report says that these companies won’t see any immediate impact on their earnings but the major hit will come in April.
Apple’s failure to sell its OLED-equipped iPhone X is forcing other smartphone makers to rethink their own strategy. Many Chinese smartphone makers have started lining up outside the doors of Samsung and LG to procure OLED panels for their future devices. Considering the difficulty in manufacturing OLED and Samsung being the largest supplier, all these companies will probably fall back to LCD panel for the next year at least.
Apple itself is rumored to be planning two LCD and one OLED iPhone model for this year. Digitimes claims that Apple is working on two LCD and two OLED models, but it will eventually launch two LCD models and one OLED model due to slower-than-expected adoption of the new iPhone X. The claim contradicts the details revealed by Kuo, who believes Apple will launch two OLED and one LCD models in 2018.
Apple will announce its quarterly results on Thursday, and it will be an indicator of what the company with the highest market cap has in store for the year ahead.
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