Apple scales down production of iPhone XR due to low demand

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Japanese news service Nikkei reported Monday that Apple has asked its Chinese suppliers including Foxconn to halt plans for additional production lines of the newly released iPhone XR, whose price starts at $749 instead of $999 and up for the other new iPhones. The XR model borrows its looks from the iPhone X and features an all-screen glass and aluminum design with a 6.1-inch Liquid Retina LCD display.

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. Weakened demand for smartphones globally might not hurt Apple's revenue too much, but suppliers could feel the strain.

Tied to this is the unexpected news that demand of the previous-generation iPhone 8, which Apple still sells, has jumped.

Apple had initially informed Foxconn to set up almost 60 assembly lines for the iPhone XR.

Last week, Apple did warn that sales for this holiday quarter are likely to miss the expectations of Wall Street.

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With regards to the growing uncertainty caused by the US-China trade disputes, Tung said Pegatron, being a technology company with global deployments, does not see it necessary to relocate its production capacity completely out of China, noting that a 3% capacity relocation might be sufficient. Apple's array of color options were also expected to give consumers more of the choice they wanted.

What about the increased iPhone 8 and iPhone 8 Plus production?

Apple shares were down 3.6 percent in Monday afternoon trading, at $200.14.

In 2016, Apple introduced a cheaper iPhone called the SE, at a starting price of $399, but failed to lure more customers to buy that product.

Apple itself doesn't publish precise sales figures for the various models, but the message from suppliers is clear: the iPhone XR isn't selling as well as expected. It's entirely possible that the reason Apple doesn't need very many XR's is that most customers are choosing the highest-end models or defaulting to the lower-end, cheaper products.

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