I think it’s time to admit that Apple’s insane, convention-breaking bet on delivering an iPhone 8 and 8 Plus and the astonishing iPhone X all within weeks of each other was a winning strategy.
Don’t look at me like you’re not surprised. Virtually everyone, including me, predicted a possible disaster. It was a feeling that only intensified after Apple unveiled and started shipping the iPhone 8 and 8 Plus, two decent upgrades that probably should have been called the iPhone 7s and 7s Plus.
I worried that the option of more affordably priced, but less exciting phones than the ultra-expensive iPhone X, might have left iPhone customers, who prize the “sexy new thing,” between a rock and a hard place. Perhaps they didn’t want the relatively minor upgrade of the iPhone 8, even with wireless charging and the powerful, new A11 Bionic mobile CPU, but couldn’t imagine paying almost $1,000 for an iPhone X.
Even before Apple officially unveiled its “future phone,” analysts were sounding the alarm, worrying that all the potentially new technology — OLED screen, TrueDepth image module, facial recognition, premium materials — might slow down production so much that supplies would be incredibly short.
Apple clairvoyant and KGI securities analyst Ming-Chi Kuo predicted in August that the devices would be in “extremely short supply.”
Even as leaks and rumors throughout the year revealed virtually every detail about the iPhone X (save its official name), Apple remained mum.
Then, just days after Tim Cook officially unveiled the iPhone X, Kuo returned with an even more dire prediction: “Due to supply constraints, we expect market demand won’t be fully met before 1H18,” said Kuo according to MacRumors.
Even as leaks and rumors throughout the year revealed virtually every detail about the iPhone X (save its official name), Apple remained mum. It’s not the company’s practice to respond to speculation, but I wondered if they would ever try to dispel the notion that they couldn’t meet iPhone X demand.
Now it occurs to me that Apple not only saw no need to respond, they were probably quietly pleased about the intense speculation.
I asked one of my analyst friends, Forrester Research’s J.P. Gownder if he thought Apple had in any way fostered the perception of short supply to help build hype.
In an email response, I could almost hear Gownder chuckling, “I can never confirm those kinds of shenanigans. I would only say that Tim Cook is one of the great supply chain management leaders in consumer electronics, and that halo products often start out with slim distribution and then expand it.”
A halo product is one that helps build a wider impression of a company and its products. The iPhone X, which represents where Apple wants to go with all future iPhones, is exactly that type of product. Its operation, features, pricing, and material are all aspirational. It’s what consumers want, even if they can’t afford it. And, since some of the functionality is replicated on lower-end devices (wireless charging and the A11 Bionic CPU), they may be attracted to those products, as well, because of their similarity to the device they really want, but perhaps can’t afford.
People want the best
There’s no question in my mind that the iPhone X is the best mobile device Apple has ever produced. It’s also a reminder that, when Apple wants, it can innovate and surprise.
Even so, as the retail launch day arrived, the day people could buy the iPhone X in store and that pre-orders were set to ship, I wondered what would happen if those reportedly scant supplies ran out within a few hours. How much frustration would there be, and would iPhone consumers be unhappy with their remaining upgrade choices: the iPhone 8 and 8 Plus (as well as the older iPhone 7, 6s and SE)?
Standing outside the Fifth Avenue flagship store before sunrise, I saw a level of excitement I hadn’t seen in years. There were hundreds of people. I started making calculations in my head for when this store and others around the world would first tell customers, “Sorry, we just ran out of the Silver iPhone X” and then, a little while later, “All the iPhone Xs are gone.”
But those moments never came. Inside the store, there were hundreds of iPhone X devices on display and soon, customers were moving through rapidly, and walking out with iPhone Xs. Online, I watched as countless people on Twitter and Facebook gleefully unboxed their just-arrived iPhone X.
Where were the shortages?
I had a few hints earlier that month that most of our predictions were wrong.
Going Apple’s way
In the first two months after launching the iPhone 8, iPhone sales overall were, according to Apple’s latest earnings report, robust. They sold 46.7 million iPhones. Apple never breaks that down into distinct iPhone model sales, but Tim Cook did throw cold water on the notion that consumers were putting iPhone 8 and 8 Plus purchases on hold in favor of the upcoming iPhone X. He said during the earnings call that sales were exceeding their expectations. “In the last week and a half of September, we began shipping iPhone 8 and iPhone 8 Plus to customers in more than 50 countries. They instantly became our two most popular iPhone models and have been every week since then,” said Cook on the call.
It’s clear Apple was taking a calculated risk with its iPhone X development plan and roll-out, but none of it looks orchestrated at the level of some mastermind marketing plan.
The next day, Cook revealed that dual announcement but staggered released of the iPhone 8 (and 8 Plus) and the iPhone X was not a marketing gimmick or some calculated plan to juice demand. Instead, he told CNBC, the iPhone X wasn’t ready, but “we felt like the most important thing for us to do was to announce them on the same day so we wouldn’t have customers buy an 8 and then we announce the X and ship it and they go, ‘Oh, you hosed me, I would’ve bought a X.”
That makes some sense, especially after we learned that the future-leaning iPhone X was originally planed for the future. As Apple SVP hardware engineering Dan Riccio revealed to me last month, Apple had “the line of sight” for a 2018 launch, “but with a lot of hard work, talent, grit, and determination we were able to deliver them this year.”
The more Riccio talked, the more it became clear that the iPhone X was Apple’s rare high-wire act, a commitment to do something magical and inspiring and in less time with, perhaps, fewer bouts of second-guessing than had ever been allowed for before. From our How Apple built the iPhone X story:
“As far as last-minute design changes? Actually, we didn’t have time for it,” said Riccio… “Quite frankly, this program was on such a fast track to be offered [and] enabled this year. We had to lock [the design] very, very early. We actually locked the design, to let you know, in November .”
It’s clear Apple was taking a calculated risk with its iPhone X development plan and the iPhone 8, 8 Plus and iPhone X rollout, but none of it looks orchestrated at the level of some mastermind marketing plan. The pieces, it seems, sort of fell into place.
Some, though, still see this all as business as usual. Longtime Apple watcher and Creative Strategies President and Lead Analyst Tim Bajarin told me via email, “Apple pushed the limits in both technology and design with the iPhone X and while outsiders saw it at a risk for them, Apple knows their customers well and for them is was just the next step in meeting the needs of their customers.”
On the other hand, even after Apple locked in on their delivery dates and after they unveiled the products and accepted pre-orders, Cook and company said nothing about supplies, even though they surely knew whether they could meet anticipated demand.
Bajarin told me he doesn’t think Apple had any hand in the supply shortage rumors.
“The shortages came out of Chinese analysts who were in contact with the supply chain. Apple never says anything about this and never will. They have no control over rumors. They lock in components 8-12 months before the start manufacturing and knew if any shortages occurred it would be from too much demand, not shortages of components,” wrote Bajarin.
We contacted Apple, but they had no comment for this story.
Now, almost a month after the on-sale date, there’s zero indication that iPhone X supplies are low. Nor are there many claims that demand is low either. Which means there may be millions of people who want an iPhone X and more than enough supply to go around.
At the online Apple Store, orders for a Space Gray 256 GB iPhone X are slated for delivery in mid December, not 2018.
As for the naysayers, well, at least one Apple soothsayer is now singing a different tune.
Earlier this week, KPI Securities Ming-Chi Kuo sent out an investors note that, according to 9to5Mac, put iPhone X daily production at nearly half a million units per day. Kuo also believes that shipments before the end of this year (read the all-important holiday season) could be “10-20 percent higher than previously estimated.” He also said shipping time is shrinking. Put simply, Kuo sees nothing but good news for Apple and its current iPhone strategy.
No wonder Tim Cook said during his most recent earnings call “As we approach the holiday season, we expect it to be our biggest quarter ever.”
Score one for Apple, for taking chances, and for the crazy ones.