A few days ago, Nikkei Asian Review claimed that Apple (AAPL 1.98%) had slashed its iPhone X production plans for the March quarter in half to just 20 million units. The production cut reportedly came as sales of the iPhone X disappointed in so-called "key markets" -- the U.S., China, and Europe.
Nikkei Asian Review is a reputable publication that has, in the past, accurately reported on Apple iPhone build reductions, so when the report was published, I was inclined to believe it.
Image source: Apple.
Now, seemingly confirming Nikkei Asian Review's reporting, The Wall Street Journal (subscription required) is out with a new report claiming the same thing. WSJ says that Apple plans to produce just 20 million iPhone X's in the first calendar quarter of 2018 -- down from, unsurprisingly, "roughly 40 million initially planned."
WSJ also adds that "other people familiar with the iPhone supply chain said Apple had cut orders for components used in the iPhone X by 60%."
There's no sugar-coating this -- the iPhone X is probably a disappointment, at least relative to Apple's own sales expectations.
It's a great phone, but...
I don't think there was any dispute that the iPhone X is a compelling device. It offered significant internal upgrades over prior-generation iPhones as well as an aesthetic makeover. It's a well-engineered, thoroughly modern smartphone.
The problem seems to be that the price is just far too high. The baseline model starts at $999, while the one with more memory goes for $1,149.
Image source: Apple.
Perhaps consumers simply aren't willing to shell out that kind of money -- at least not as many consumers as Apple had expected -- for a smartphone, period. Alternatively, perhaps more consumers are willing to spend that kind of money on flagship smartphones, but Apple didn't quite deliver on that front.
The good news is that if it's the former, then Apple should have a lower-cost but still thoroughly modern device in the form of the 6.1-inch LCD iPhone out later this year. This product could get users of older-generation iPhones who were attracted to the iPhone X's features and capabilities but were scared off by its price tag to finally upgrade.
If it's the latter, then Apple seems to have a few aces up its sleeve in the form of this year's next-generation iPhone X -- think of it as this year's iPhone X, but with improved specifications and features -- as well as a larger version of that device to satisfy customers who prefer larger screens, such as high-end smartphone customers in China).
Of course, Apple will need to improve the specifications and features of its next-generation high-end devices at a pace quicker than its competitors do if it wants to improve its chances of getting customers to pay the premium it wants for the phones. Otherwise, Apple is just running in place with respect to competitive positioning.
Foolish takeaway
The 2017 iPhone lineup, which starred the iPhone X, doesn't appear to have delivered the kind of unit shipment growth many investors and analysts had expected it to ahead of its full availability.
I don't think all is lost for Apple's iPhone business -- Apple should still enjoy year-over-year revenue and profit growth thanks to the addition of the iPhone X to the lineup during the current cycle. More importantly, I think there's room for Apple's iPhone business to grow further as it introduces a wider range of more compelling products in the coming product cycle.
