iPhone X spells doom for pricey smartphones

By

iPhone X laying down
iPhone X isn’t the flop many analysts predicted it would be.
Photo: Ste Smith/Cult of Mac

iPhone X looked set to become the beginning of a worrying smartphone trend when it went on sale last November, sporting a hefty $1,000 price tag. We were sure future flagships would be similarly expensive. But consumers just aren’t having it.

With iPhone X demand showing no signs of improvement in 2018, analysts are warning that the market “may not tolerate” rising smartphone prices.

iPhone X enjoyed a positive start as hardcore Apple fans busted open their savings and skipped rent to be the first to get their hands on the company’s best smartphone yet. But now that the early adopters have been served, iPhone X just isn’t selling.

iPhone X’s future looks bleak

Analysts have been reporting for several months that iPhone X demand is significantly weaker than expected — and falling further by the day. They say holiday sales were poor, and they don’t expect the situation to improve before Apple introduces new models this fall.

“Sources inside Apple’s Asian manufacturing supply chain paint a much gloomier picture than [Tim] Cook,” reports Business Insider, citing a note from analysts at Longbow Research. “This period of flat or declining sales is likely to continue for much of the rest of the year.”

Nomura analyst Jeffrey Kvaal reports much the same — and indicates the situation will get worse. “Our demand checks suggest little improvement in iPhone demand in 2018,” he told investors. “Corresponding supply chain downticks suggest iPhone expectations have yet to bottom.”

iPhone X did help average selling prices (ASPs) rise in the final quarter of 2017 — thanks to that early demand. But they’re expected to fall again in the March quarter now that iPhone X sales have dropped. Apple suppliers are also suffering as a result of weaker demand.

Hefty price tags are the problem

Analysts no warn that the market just won’t accept the rising price of smartphones. There are “several indications the market elasticity is falling,” Kvaal added. “We do not believe it is coincidence that the highest end of the product portfolio, the X, is the model that is flagging.”

The market “may no longer tolerate rising ASPs,” Kvaal concludes, which could suggest that smartphone makers like Apple will have an incredibly tough time selling their most expensive handsets going forward. Consumers can only hope that this will lead to a rethink of rising prices.

Longbow has now decreased its sales expectations for the year and expects just a 2 percent rise in iPhone growth. Nomura has lowered its sales expectations to 8 million to 12 million units, down from 13 million to 18 million units.

Demand could rocket this fall

This isn’t good news for Apple or its investors right now, but it could be little more than a blip. Despite the poor performance of iPhone X, many analysts have predicted that demand could skyrocket this fall when Apple introduces its next-generation iPhone lineup.

Alongside a refreshed iPhone X, and a larger model currently being referred to as iPhone X Plus, the company is also expected to deliver a much more affordable handset with the same edge-to-edge design that’s likely to sell like hot cakes.