TAIPEI – Apple has asked vendors to increase production of its latest iPhone 11 series by up to 10%, or 8 million units, Nikkei Asian Review has learned, following better than expected worldwide demand for the new cut price.
The increase in orders seems to validate Apple CEO Tim Cook's new strategy to lure budget-conscious consumers into cheaper models amid the weakened world economy. The order increase of between 7 million and 8 million units is the equivalent of total annual phone calls this year by Google, a growing iPhone rival in Apple's home market in the United States.
"This fall is so much busier than we expected," a source with direct knowledge of the situation said. "Previously, Apple was pretty conservative when it came to placing orders," which was less than last year's new iPhone. "Following the increase, the prepared production volume for the iPhone 1
The shares of Apple component manufacturers rose in Japan following the publication of the Nikkei report, outperforming the broader market. Japan's Minebea Mitsumi closed up 3%, troubled iPhone display maker Japan Display rose by almost 2%, while Murata Manufacturing and Alps Alpine also gained.
Apple launched its three new iPhone models – iPhone 11, 11 Pro and 11 Pro Max – in early September, and for the first time in its history, the starting price of the model upgrade, despite better cameras, reduced to $ 699, compared to $ 749 for last year's iPhone XR.
Apple's new budget-conscious strategy came as the global smartphone market is expected to shrink overall for the third consecutive year, according to research firm IDC. In January, Cook acknowledged that "price is a factor" behind Apple's declining sales, especially in emerging markets.
The recent increase in iPhone orders is concentrated on the cheapest iPhone 11 model and iPhone 11 Pro model, sources said, while Apple has slightly revised orders for its top model, the iPhone 11 Pro Max, which has a starting price of 1 $ 999.
Cook recently told the German newspaper Bild that he could not be happier with the launch of the iPhone 11 and that the sale had had a "very strong start." Apple's stock price has advanced almost 40% this year and is now near record highs October 2018.
Nevertheless, suppliers are still cautious and said they were concerned that higher order levels would not be maintained.
"Demand is good for now. But we have to be careful about being optimistic," an executive level source told Nikkei. "I hope this year's high season lasts longer than last year."
One factor that may have helped to temporarily increase demand is that Apple's iPhone 11 is still being produced in China, and Washington has temporarily postponed a planned 10% tariff on China-made electronic imports. The delay in the toll rise, from September to December 15, will contribute to demand in the Thanksgiving party and Christmas shopping seasons. Donald Trump has reinforced his stance on trade talks with China, saying in September that he did not want a temporary cease-fire.
Regardless, the rise in iPhone orders is a welcome change in the recent fortunes of California-based Apple.
Last year, Apple asked key iPhone mounts Foxconn, formally acting as Hon Hai Precision Industry, and Pegatron to suspend additional production just weeks after the iPhone XR hit the shelves, as the Nikkei Asian Review first reported in early November.
in January, Apple made a rare move when it cut its quarterly sales forecast, blaming the soft demand for iPhone in China as the economy slowed.
A sustained increase in demand now would therefore offset the fall in iPhone sales in iPhone – the company's first since the iconic handset was first launched in 2007.
"Apple's pricing strategy this year so far appears to have boosted some initial sales and pre-orders. … Given the weakened world economy and uncertainty ahead, however, we are worried whether good demand will last long," said Chiu Shih- Fang, a veteran smartphone analyst at the Taiwan Institute of Economic Research.
"Although the second half is definitely better than the first half, we need to monitor if the lower average selling price can have an impact on Apple's total sales."
Yasuo Nakane, head of global technology research at Mizuho Securities, said he had revised up iPhone production estimates for 2019 to 194 million units from 178 million – although still less than the 208.8 million iPhones sold in 2018.  All models in the iPhone 11 series have better cameras than last year, and features facial recognition and wireless charging similar to 2018.
Unlike competitors Samsung Electronics, Huawei Technologies, Xiaomi a and Oppo did not introduce Apple 5G compatibility, the next generation wireless communication standard that enables faster data transfer and low latency.
In the first half of 2019, Apple saw a nearly 25% drop in iPhone shipments, compared to 2018, according to IDC – far worse than its main rivals, Samsung Electronics and Huawei Technologies. The world's top two smartphone manufacturers saw a fall of almost 2% and almost 26% increase in shipments during the same period.
Apple declined to comment.
Further reporting by Nikkei staff writer Yifan Yu