Apple faces doubts over iPhone 8 demand

Apple faces doubts over iPhone 8 demand

September 22, 2017   02:30 pm

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Apple’s staggered smartphone launch this year threatens to diminish excitement around Friday’s release of the iPhone 8, analysts say.

Anticipation for the $999 iPhone X, which offers a radical redesign, new screen and advanced camera features but will not be released until November, has been blamed for a more muted reception to the iPhone 8, which offers more limited improvements over its predecessor. 

“I think demand is down from last year, for no other reason than you have another flagship phone,” says Neil Cybart, an Apple analyst at Above Avalon. “A portion of the iPhone launch demand is not materialising quite yet.” 

That could leave this weekend’s initial sales lower than at any point since the iPhone 6 first launched in 2014, Mr Cybart added. 

Apple’s decision to increase prices for the iPhone 8 compared to last year’s model and a less aggressive launch push by mobile carriers could also affect demand. 

“The lack of operator promotions and anticipation for the iPhone X have dampened investors launch-day expectations,” said Walt Piecyk, analyst at BTIG Research. “Wireless operators have pulled back on their promotions this year and it doesn’t look that will change when the iPhone X is released.”

Estimating iPhone sales is also getting harder. In recent years, Apple has tried to tamp down on the often chaotic lines that used to appear outside its retail stores on launch day, encouraging customers to order online up to a week ahead of the device shipping. 

Instead of counting the number of people queueing up outside flagship stores around the world, analysts looking for clues to customer demand have begun to track the lead times for items ordered from Apple’s website. However, with the manufacturing supply available unknown, the technique is not always reliable.

Apple has also stopped announcing launch weekend sales figures, which makes life even harder for those trying to predict whether the new model will prove popular enough that the company reports increased iPhone sales in the quarter ending this month. 

In its efforts to sustain growth this year while protecting its margins from higher costs of components such as flash memory, Apple has bumped up iPhone pricing. As well as the premium-priced iPhone X, the iPhone 8 and 8 Plus are $50 and $30 more expensive than their equivalents last year. 

“The price increases on the iPhone 8 and the X should reduce the reliance on unit growth to deliver revenue for Apple,” said Mr Piecyk. 

This month, Apple has quietly raised prices for other products too, including higher-memory versions of its iPad Pro, AppleCare insurance and replacement iPhone screens. Outside the US, these increases might feel even more pronounced to consumers: an iPhone 8 costs $699 in the US, excluding any state sales taxes, but £699 in the UK, including VAT — £100 more than an iPhone 7 a year ago. 

Analysts at Morgan Stanley see these price increases as a sign of Apple’s confidence in its ability to innovate. They predict that the average selling price (ASP) of an iPhone will rise to $784 next year from $606 in the most recent quarter. 

“An aspirational brand, high customer loyalty, and weaker US dollar allow Apple to increase prices without hurting demand,” wrote analysts at Morgan Stanley in a recent note. “In fact, demand for iPhone is directly correlated to the direction of ASPs — higher prices, higher demand and vice versa.”

- The Financial Times 

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