iPhone 8 Production Reduced Due to Poor Demand

If latest news reports are to be believed, Apple has reduced the orders for both the iPhone 8 and the iPhone 8 Plus. The company has cited poor demand from the market for such a decision. The almost 50% low production will continue for the months of November and December, according to a supply-chain source in Taiwan.

After this news was out, Apple’s stock dropped by 1.5% in pre-market trading. According to industry experts, this is the first time in the iPhone’s history that production has been cut so early in the cycle. With iPhone X preorders not open, reduced demand for the iPhone 8 could be either bad news or good for Apple.

The pessimistic interpretation would be that customers are not seeing enough differentiation between the iPhone 7 and 8, and are holding off until next year. The optimistic take would be that more customers than expected are willing to pay the price premium for the iPhone X.

Pessimists may be influenced by a carrier store survey claiming that the iPhone 7 is outselling the iPhone 8. Previous reports of iPhone 8 sales have sent mixed messages, KGI suggesting that the iPhone 8 Plus in particular has been seeing ‘better than expected‘ sales, backed by Foxconn revenues, while US telecom services provider AT&T says that iPhone 8 sales are 900k down on those of the iPhone 7 last year.

Gartner would be in the optimistic camp, predicting earlier this week that iPhone X sales would help the smartphone sector as a whole return to growth next year. Even if demand is there, however, there are still big questions over supply, the 3D camera module said to be limiting production volumes.

Tim Cook has on more than one occasion warned that supply chain reports are a poor proxy for orders, due to the company’s complex network of suppliers, many components having multiple sources.