Apple Corporation has reportedly told its major smartphone assemblers in China to cut down production lines for the new iPhone XR. The decision comes after the company's smartphone global shipments in the third quarter almost stayed the same year-on-year, while China's Huawei shipments jumped 33 percent.
Experts said Apple's current strategy is to raise prices to maintain revenue growth at the expense of shipments growth. It works for the company now, but in the long term, Chinese companies like Huawei, which has made market progress in innovation, could be more competitive.
Nikkei.com reported that Foxconn and Pegatron had been told to halt plans for additional production lines dedicated to the iPhone XR, the relatively cost-effective model that hit shelves in late October.
"For the Foxconn side, it first prepared nearly 60 assembly lines for Apple's XR model, but recently uses only around 45 production lines," a source told The Nikkei. That means Foxconn would produce around 100,000 fewer units daily, down 20 percent to 25 percent from the original optimistic outlook.
"Apple's current strategy is to maintain its revenue by raising the price at the expense of losing some shipments, while Chinese smartphone manufacturers are aiming at raising shipments," said Jia Mo, a research analyst at Canalys, a global technology market analyst firm.
"It works for the company now," Jia said. "Revenue in major markets like China actually has grown significantly, and has achieved the company's strategic goal."
Jia doesn't worry about Apple's sustainable growth based on this strategy. He thinks that Apple has a loyal consumer base whose updating habits of iPhones are relatively fixed. "The company is not likely to lose these loyal consumers," Jia said.
According to the latest research from Counterpoint published on Friday, the Chinese brand Huawei, which has surpassed Apple in the second quarter in shipments, holds on to the second position for two consecutive quarters.
Other Chinese brands Oppo, Xiaomi and Vivo have reached their highest ever shipments in a single quarter despite a global slowdown.
Xiang Ligang, chief executive of the Chinese telecoms industry news site cctime.com, told the Global Times that now the global shipments have met some challenges, and Apple's strategy is to raise prices, which depends on its brand advantage in the global market.
Smartphone manufacturers with renowned brands and full covered products lines are more competitive, Xiang said.
China's brands are doing well in core technology innovation and will see rapid growth in many areas, which will help them to succeed in the global market.
