Shrinking demand forces Apple to slow down iPhone X production

The iPhone X launched to stellar reviews and equally strong sales, but Fast Company is reporting that demand has slowed considerably. A source within Apple’s supply chains has said that the company plans to make a mere eight million units for the second quarter of this year.

Part of the problem stems from the simple fact that the rush of holiday sales convinced Apple to produce too many iPhone X units and now needs to “burn off” its supply. In total, Apple sold more than 77 million iPhones during the 2017 holiday season. Tim Cook has said that the iPhone X outsold all other models every week of the first quarter since its release. This tracks with Above Avalon analyst Neil Cybart’s estimate that the iPhone X accounted for about 35 percent of all smartphone sales during the holiday season.

Demand for the device has slowed down considerably since then, however, and Apple’s supply chain reflects this new reality. TSMC, which produces many of the chips used in the iPhone X, warned investors of falling demand for its chips. Analysts expected TSMC to earn about $8.8 billion, but the company’s quarterly guidance reports say that number is closed to $7.8 to $7.9 billion.

Australia-based AMS, which makes some of the components used in Apple’s facial recognition system, warned that it expects its second-quarter revenue to be half what it was in the first.

Internally, there are reports that some within Apple are disappointed in the iPhone X sales and have questioned the wisdom of releasing a $1,000 smartphone. This mindset may help determine Apple’s game plan for 2018. The company is expected to release three new iPhones this year, including a 6.1-inch LCD model.

The LCD phone could be priced as low as $550. Some sources within Apple say that the company expects this more affordable iPhone to account for as much as 50 percent of unit sales once it is launched.

None of this means that the iPhone X is a failure. Cybart estimates that, by the time the 2018 iPhones launch, the iPhone X will have sold 60 million units and earned Apple $59 billion in revenue. There are plenty of companies that would love to have that level of “disappointment.”