Apple cancels production boost for iPhone XR because demand not meeting expectations

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A demonstration of the newly released Apple iPhone XR is seen following the product launch event at the Steve Jobs Theater in Cupertino, California, US September 12, 2018.

Apple has told its top smartphone assemblers-Foxconn and Pegatron-"to halt plans for additional production lines dedicated to the new iPhone XR".

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Apple shares fell almost 4 percent after a report signaled that its new, lower-priced iPhone XR might not be selling as well as expected.

Five years ago, Apple cut production orders for its plastic-backed iPhone 5C a month after its launch, fueling speculation of weak demand for the model.

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Apple also stoked worries about iPhone sales last week when it said that beginning this quarter, it will no longer break down unit sales for iPhones, iPads and Macs. Those phones are about 20% cheaper than the iPhone XR, showing that demand for iPhones is still strong but that some people aren't willing to shell out the big bucks just to have the newest model. According to Nikkei, this means that Foxconn will be producing almost 100,000 units less every day based on the new forecasts available. Its sources say that Apple has told its manufacturing partners, Foxconn and Pegatron, that it won't be needing the extra production lines it originally expected to tap. "The utilization for the XR production is not reaching its maximum capacity now", another source said.

A bunch of Apple's other Taiwanese suppliers fell sharply, including camera lens-maker Largan Precision Co, which was down more than 7 percent, and Flexium Interconnect, which fell 6 percent. It's possible, for instance, that overall iPhone demand is down and Apple is reducing its production costs.

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Profits might be the most important indicator of success for Apple in the smartphone and tablet markets right now, but make no mistake, unit shipments still matter. Now its primary customer has advised it does not require more. Apple may be predicting lower iPhone sales in the future, that's why they also increased the prices of their devices to keep their revenues steady.