Underscoring consumers reluctance to purchase ultra-pricey smartphones, Apple Inc. (AAPL) plans to focus more on cheaper liquid crystal display screens for its next iPhone lineup.
Citing people involved in Apple’s supply chain, the Wall Street Journal reported LCD iPhones will make up the majority of the fall lineup, which is more than analysts had been expecting. It also implies that a move toward organic light emitting diode or OLED screens, which are bendable, will be rolled out on a more slower basis. The iPhone X boasts an OLED screen, which boosts the starting price tag for the phone to $999. The paper, citing research from IHS Markit, noted the cost of an iPhone is increased by around $100 because of the OLED screen while anLCD screen costs about $40. (See also: Apple Stock: Traders Should Wait for $170 to Buy.)
iPhone X Is Too Pricey For Many
The iPhone X has proven to be too expensive for consumers, hurting sales of its latest smartphone. Apple did say in May that the iPhone X was the best selling of its mobile phones during the March quarter but analysts told the Wall Street Journal that LCD models are selling the most given the price point is lower. The iPhone 8 starts at $699 while the iPhone 8 Plus is priced beginning at $799.
Average Selling Prices Could Be Pressured
This fall Apple is expected to launch two OLED and one LCD iPhone. And while the Cupertino, California tech company wanted to have equal production of both the OLED and LCD models it now plans to make more of the LCD ones, betting consumers will favor the lower cost model. That could hurt its ability to raise average selling prices on the devices. This year the ASP went up 13% boosting revenue while shipments remained flat, noted the report. Wall Street is anticipating ASPs will be flat in 2019. As for next year, the thought is Apple will have one or more LCD model instead of going to OLED only. That too is being driven by price. Apple wants to have a cheaper option available, noted the report. (See more: Xiaomi May Be Worth Twice as Much as Apple: MS.)
At the same time that Apple is refocusing its production plans around the LCD it is reportedly warning suppliers that demand for new iPhone parts could plunge by 20% in the second half of the year, according to a report earlier this month by Japan’s Nikkei newspaper. "Apple is quite conservative in terms of placing new orders for upcoming iPhones this year," one supply chain source told the Nikkei Asian Review. "For the three new models specifically, the total planned capacity could be up to 20% fewer than last year's orders."