The Strange Case of the Curious iPhone X Sales Numbers

December 27th, 2017

To put this all in perspective, consider the time when published reports indicated that demand for the iPhone 5 had collapsed towards the end of 2012. It was all based on claims of reduced component orders from Apple’s complicated supply chain, and the stock price fell appropriately.

Except, when actual sales for the December 2012 quarter were announced, sales had increased by a decent margin, not decreased. It was only with the iPhone 6s, released in 2015, where sales flattened and fell. Tim Cook’s responses to the misleading reports about the iPhone 5 were to educate industry analysts about the fact that you can’t make assumptions about product demand based on a few supply chain metrics.

Maybe the media and some industry analysts haven’t learned this lesson.

So you’ve probably read the recent stories. Reports from the supply chain, sourced in Taiwan, claim that orders for iPhone X have been sharply reduced for the March quarter. This has led some tech and industry pundits to claim that demand may be low because it’s too expensive.

While it would represent the first full quarter on sale for the iPhone X, don’t forget that March quarter sales do tend to be lower than a holiday quarter.

Still, there’s a disconnect here. Other other reports claim that iPhone X sales have been better than expected, and the reason that Apple has pretty much caught up with demand is the result of efficient production. The early problems have been overcome, and everything’s coming up roses.

This brings to mind the erroneous sales reports about Mac sales for the September quarter from Gartner and IDC. They concluded that they were relatively flat or falling. In the real world, Apple announced that sales had increased by over 10%. But that wasn’t the first time such surveys had undercounted the Mac. I just wonder how their paying clients must feel receiving incorrect information.

So what about the iPhone X? What reports should you believe?

Well, according to analyst Jun Zhang of Rosenblatt Securities, an investment firm, the supply chain reports of reduced iPhone X orders are incorrect. Zhang says that the cuts actually refer to the iPhone 8 and the iPhone 8 Plus, consistent with the ramping up of iPhone X production. What’s more, the company claims to have seen evidence that sales are increasing in China, which has been a difficult market for Apple.

That conclusion is consistent with earlier reports of expanding production and high iPhone X sales. Remember, this comes from a firm that has tended to be bearish on Apple’s stock, so the positive news gains even more credibility.

So what are we to make about these dueling iPhone X sales trends? Is it as successful as some hoped, more successful, or are customers being turned off by the high price and perhaps the need to learn some new gestures due to the loss of the Home button? Don’t forget that the $1,000 price point was telegraphed for months, so it couldn’t have come as a surprise.

What did come as a surprise were the reports of high demand for the 256GB model, which lists for $1,149.  Not mentioned is whether there has been any customer resistance to paying prices in the $950 range for the Samsung Galaxy Note 8. If Apple’s prices are generating resistance, wouldn’t the same hold true for a Samsung, even if it costs a little less?

What appears to be true is that most Apple Stores have them in stock, and you can order one online and have it in a couple of days at most. Independent retailers also appear to have decent supplies, so if you want to buy an iPhone X, and missed the Christmas rush, you should have no problem finding one.

The real question, I suppose, is how many units of the iPhone X must Apple sell to demonstrate success? Remember that the mainstream models are the iPhone 8 and the iPhone 8 Plus. They are only slightly more expensive than last year’s models, and the improvements are decent enough, especially if you have a much older model. Introducing two separate iPhone product lines at the same event clearly changes the picture.

In the end, two factors will count most for industry analysts and Wall Street. The first is total iPhone sales; Apple doesn’t do model breakdowns. The other is the ASP, the average sale price, and if it is higher, that would mean more iPhone X sales. Some suggest it’ll exceed $700 for the first time.

Regardless, there is no prior experience for this sort of model breakdown from Apple. You can’t compare sales numbers from Samsung and other smartphone makers, simply because no individual flagship model from those companies comes close to the iPhone. A new paradigm exists here, and Apple will no doubt use the results to determine how to set up the product lineups going forward.

You can certainly believe whatever estimates you want, but remember that the real results won’t be released by Apple for a few more weeks. Then we’ll see whether the stories playing down iPhone X sales have any basis in fact, or whether the more positive estimates are closer to the mark.

But don’t forget all the iPhone 5 sales fear-mongering in late 2012 and 2013, and how that turned out.

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