In July, Apple reported its iPhone revenue had hit a record low, representing less than 50 percent of the firm’s income for the first time since the product’s introduction. However, Bloomberg reports the corporation recently asked its suppliers to ramp up production of the iPhone 11 by 10 percent. As a result, the firm will be manufacturing at least seven million more phones than it initially projected.
Why Apple is Increasing iPhone Production
According to Nikkei Asian Review, Apple made the call to increase production of its flagship handset due to unexpectedly high demand. Notably, Apple suspended production of the iPhone XR due to a sudden global slowdown in the smartphone sector. Consequently, the Big Tech set a conservative production target for the iPhone 11 line. However, the XR’s successor device is proven more attractive to consumers.
The answer to the question as to why this iteration of the iPhone is more popular than its predecessor is unknown. The iPhone 11 doesn’t feature a killer update akin to Siri. Moreover, the company’s latest devices aren’t 5G compatible. It’s also worth noting Apple’s market share in China, the world’s largest mobile device market has trended down this year.
Apple may have benefited from the botched releases of the Samsung Galaxy Fold and Huawei’s Mate 30 Pro. Conversely, Bloomberg posits consumers like that the standard addition iPhone 11 is $50 cheaper than its XR counterpart.
While having to up production to meet demand is a good thing, Apple may encounter some problems related to the surging sales of the iPhone 11.
For one thing, the Trump administration intends to issue a 15 percent tariff on Chinese made electronics this December. As a result, Apple will have to either eat the import tax or raise prices on its handsets. As the firm is just now rebounding from a year-long sales slump, both outcomes are problematic.
Furthermore, Bloomberg indicates Apple is only asking for increase production on the basic version of the iPhone 11. Accordingly, the corporation might be experiencing less than robust sales of its higher-priced iPhone 11 Pro ($999) and Pro Max ($1,099). Indeed, though the luxury addition handsets boast impressive cameras, they lack a must-have feature that would justify their cost.
Although Apple has an impressive 35 percent gross margin on its smartphones, its profits will suffer if it only moves bargain handsets.