Apple Cancels Plans to Boost iPhone XR Production

The iPhone XR may not be selling as well as Apple hoped.                  Ian Knighton  CNET

The iPhone XR may not be selling as well as Apple hoped. Ian Knighton CNET

Apple's new iPhone XR has apparently gotten off to a slow start.

Apple had also asked Wistron, a smaller iPhone assembler, to stand by for rush orders, but the company will receive no orders for the iPhone XR this season, the report said, citing supply chain sources.

"We caution investors not to lose sight of the massive metamorphosis on the horizon at Apple being led by the services business", Ives wrote in a research report published Monday. This has led the company to cancel a so called "production boost" for the model.

"If the reports are accurate, we do find it somewhat disturbing that this would take place so early after the launch of the iPhone XR", Angelo Zino, an analyst at CFRA, said of the Nikkei report.

Cutting corners: iPhone manufacturers are not able to make full use of their production capabilities and are closing down unneeded assembly lines.

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According to a report Monday by Japan's Nikkei, Apple "signaled disappointing demand" for the iPhone XR by informing manufacturing partners Foxconn and Pegatron to halt plans for additional production lines of the smartphone targeted at price-conscious consumers.

The iPhone XR, meanwhile, is having its demand outlook cut by around 20% to 25%, according to the Nikkei source. Reportedly, Apple has instructed three separate suppliers to either reduce or completely eliminate production expectations for the new device.

In contrast, the iPhone XR's $750 starting price made it seem a relative bargain. In Foxconn's case, it prepared 60 production lines for the iPhone XR, but so far has only used 45. Apple has ordered 5 million more iPhone 8 and 8 Plus units this quarter, bringing the total to 25 million.

This information may help explain why Apple provided a dim forecast for iPhone sales in the current quarter.

This, combined with the rapid rise of China-based handset makers like Huawei, may also help explain why Apple will no longer provide iPhone unit sales figures: The firm is no longer the number two player in the smartphone market and may fall to number four or five in the coming year by unit sales.

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