Apple desperately needs the iPhone X to be a hit

The iPhone X is the biggest change in the overall design since 2007, and will set the tone for future generations of the device.
October 26, 2017, 10:58am

The iPhone X is a big deal for Apple. After four years of rather ho-hum predecessors, the new phone presents the biggest change in overall design since 2007, and it will set the tone for future generations of the device.

It is, Apple says, a reimagining of what the smartphone can be, a decade since the iPhone debuted.

More importantly, for Apple and its investors, the 10th-anniversary iPhone is set to spark a super-cycle in sales, where a majority of users upgrade as a result of a significant update in design and features. If it works, some have predicted it would drive Apple towards becoming the world’s first trillion dollar company‚ given that iPhones provide Apple with the majority of its profits.

The pressure on Apple’s new phone to succeed grew this week when initial sales figures for the iPhone 8 — announced alongside the iPhone X — showed a decided lack of enthusiasm. While that phone met stellar reviews, the basic design is virtually indistinguishable from the iPhone 6 in 2014.

“The iPhone X is a key component of Apple’s future” Laura Simeonova, an analyst with CCS Insight, said. “The 10-year anniversary iPhone is the building block for the next generation of iPhones and the most expensive iPhone to date, aiming to fuel growth in the ultra high-end segment.”

Most analysts who spoke to VICE News put the weak iPhone 8 figures down to pent-up demand for the iPhone X.

Pre-orders begin

On Friday, we’ll find out if that is true when people in 55 countries get their first chance to pre-order the iPhone X, ahead of it going on sale in store on November 3.

But Apple will likely disappoint scores of potential customers because of major shortage of stock — and that presents a big problem for the company.

Multiple reports in recent months have said supply of the iPhone X would be severely constrained when it launches. On Tuesday, the Nikkei reported that Apple would only get hold of half the number of new smartphones it initially wanted.

“Initial shipments of Apple’s highly anticipated iPhone X are expected to total around 20 million units, only half the planned amount for this year,” the Nikkei reports. Well-regarded Apple supply chain analyst Ming-Chi Kuo reported last week that at launch, the number of iPhone X units available could be as low as 2 million to 3 million.

Face ID

The iPhone X has reportedly faced a number of production issues including supply shortages for key components like the iPhone X antenna and wide-angle camera. There have been reports of production issues with the depth-sensing Infrared dot projector — key to its headline Face ID system.

According to sources speaking to Bloomberg, Apple quietly told suppliers to reduce the accuracy of the face-recognition technology, making the phone easier to manufacture. Apple refutes the story, calling it “completely false.”

However, Apple is clearly concerned about production, so much so that its COO Jeff Williams paid its main manufacturer Foxconn a visit this week.

Technology analyst Ben Thompson says that whether the reports are true or false, the fact remains that Face ID will likely work well enough, because Apple will have “over-engineered the modules” to allow for some leeway to make changes during production.

“Maybe Face ID is just going to be really good. I suspect it will be good enough,” Thompson said. “This quarter’s results, though, have become even more fascinating.”

So far those numbers are not looking great.

Weak iPhone 8

Figures released by Consumer Intelligence Research Partners showed that in their first week of sales, the iPhone 8 and iPhone 8 Plus accounted for 16 percent of all smartphones sold in the U.S.

Considering that Apple’s market share in the U.S. is typically around 35 percent — according to Kantar Worldpanel — the sales of Apple’s new phone must be considered a disappointment. As a result, the pressure on iPhone X to outperform is growing.

“Expectations for the iPhone X are at fever pitch and I think that a super-cycle is now required to prevent a sell-off in the shares,” according to Richard Windsor, a technology analyst at Radio Free Mobile.

But he doesn’t think that’s going to happen for three reasons.

Firstly because the iPhone X doesn’t offer a substantially better experience that the iPhone 7; secondly, the high $999 price tag; and finally, the fact that Apple is now so big, posting huge growth figures as it has in the past is more difficult.

“I think the iPhone X will stimulate a replacement cycle but one that is smaller in magnitude compared to the iPhone 6,” Windsor said.