Why the iPhone XR Isn’t More Popular

iPhone XR in black, blue, and silver

Something is happening with the iPhone XR. No one except Apple knows for sure what the sales numbers are relative to the XS family. But interesting questions are being posed.

iPhone XR in black, blue, and silver
Apple’s iPhone XR. Second best was too late?

It all started with rumblings from the supply chain. When this happens, cooler heads point out that sporadic, isolated Apple cutbacks in production can’t be taken as sound indicators that a model is in sales trouble. Tim Cook has told us that on several occasions. And sober analysis sets us straight. Again, “Analysts: iPhone Sales Panic is ‘Overblown’.”

And yet, something seems to be going on with the iPhone XR. “Goldman Sachs downgrades Apple for 2nd time this month, warns Apple may have ‘miscalculated’ iPhone XR pricing strategy.” Goldman Sachs analyst Rod Hall wrote:

In addition to weakness in demand for Apple’s products in China and other emerging markets it also looks like the balance of price and features in the iPhone XR may not have been well-received by users outside of the US.

Two things to note here. Analysts have to depend on indirect data and then make some assumptions. Secondly, how other websites size up those reports depends on the editorial slant: click-bait or professional analysis.

However, there comes a time when little bits of evidence keep cropping up, and then it’s useful to ask interesting questions.

iPhone XR Questions

Some of those questions were properly posed by John Gruber. Gruber admits, for starters,

Demand for iPhone XR may well be weaker than Apple and analysts expected. I don’t know. But I will say this: you can’t judge this from poor-mouthing from Apple’s Asian suppliers.

But there’s still some smoke in this iPhone XR affair. Goldman Sachs looked at sales weakness in China and other emerging markets, not supply chain cutbacks. That opens the door to some informed speculation. Gruber has a theory.

What people don’t seem to be considering is that maybe the iPhone XR is less in demand not because it offers too little compared to the XS, but rather too much.

That is to say, customers in 2017 had a choice between the Touch ID of iPhone 8 and the more exotic iPhone X. This year, customers were confronted, first, with a dramatic rollout of the iPhone XS/Max and the less spectacular XR drifted in a month later. Yes, there were many informed customers who were eager to pay less, but there were also many for whom the forced change to Face ID was an uncomfortable change. They passed.  In addition, if the fraction of those Apple estimated would wait  turned out to be too small, the XR sales would suffer accordingly.

A Mix of Customer States of Mind

It all boils down to the fractional makeup of various customer mental states. For example, my own theory is that there was a segment, larger than expected, for whom waiting for second best was not an option. Plus, as Goldman Sachs surmised, the XR price was still too high for emerging markets. A double whammy.

It’s a complicated mix of customer attitudes and global markets. If one is skewed by customer irrationalities, finances, or ignorance, the iPhone product sales mix can be different than estimated. Gruber notes:

But consumers aren’t objective and often aren’t particularly well-informed.

Over the last decade, Apple has shown great mastery in understanding what customers want in the iPhone. But, given how (we believe) technical difficulties with the XR display caused a delay in the rollout, Apple’s hand was forced. And since Apple doesn’t report unit sales numbers anymore, we’ll never know the real impact. If anything ,however,  the discussion has shown us what Apple has to deal with each year.

9 thoughts on “Why the iPhone XR Isn’t More Popular

  • My wife and I recently upgraded from our almost five year old iPhone 5S’s … she got the 8 Plus and I got the 8.

    No stinking way am I pay $1,000 for a phone, Tim Cook. If the XR had been more reasonably priced, it might’ve enticed me … but I’m not a fan of the gigantic phones either.

    I think that $599 (mine) and $699 (my wife’s) was overpriced, but at least I didn’t feel like I had been robbed blind.

    Old UNIX Guy

  • John:

    The more I read analyses, whether technical, political or academic, the more I’m convinced that the capacity for deep thought and the integration of disparate but relevant and related facts, ideas and insights even within a given discipline, let alone across disciplines, is both precious and uncommon. Thankfully, both thoughtful analysis and discussion are commonplace at TMO. To some extent, our deep thought desert may be mediated by how our brains work, namely pattern recognition of immediate threats and opportunities in our immediate environment necessitating an immediate response. Evolutionary fitness has conditioned us to expend no more energy than is required. Context for most patterns we apprehend being immediate, we probe and therefore think no farther. I may be wrong.

    The relevance? What many pundits and analysts have focussed on are the comparative offerings and prices of the new iPhones, ie the product. This is limited analysis to the point of being not simply unhelpful but misleading. It suggests that there is a ‘thing’ that one can do to the product that will light a fuse under consumer uptake. Many a manufacturer have followed this folly into bankruptcy and extinction.

    I think technology purchasing patterns reflect broader macro trends that include a number of intangible but powerful effect modifiers often encapsulated by the term, ‘the human factor’. That human factor contradicts the ‘rational consumer’ model acting in one’s best interests regarding supply and demand, as economists and social scientists have repeatedly debunked this myth with empirical evidence. Beyond a certain, limited point, we are not rational about our purchases.

    Far more relevant to our consumption is perceived benefit across a range of expectations. These include perceptible change in user experience, improvement in quality of life, impact on social status, exhilaration, and competitiveness, to name but a few effect modifiers (note how many ads contain the words, ‘Be the first to own the new’…thing).

    Technologies mature at different rates. Some technologies even morph into a new technological category altogether, like the iPhone. The appeal of the iPhone and smart phones writ large have little to do with telephony, which has a negligible impact on consumer demand. These devices plough new fields of use case, and reap the harvest of a new cultural relevance and adoption. During that device’s rapid evolution, market dynamics, adoption and purchasing patterns are volatile, consumer behaviour is driven by a dynamic mix of these non-rational considerations mentioned above, and adoption may follow a steep trajectory.

    Once a technology is mature, however, and subsequent upgrades have a modest to marginal impact on use case, purchasing patterns settle into the more traditional ‘rational consumer’ model; think automobiles and traditional PCs. I submit that the current iPhone paradigm represents a reasonably mature technology. Users in my (now young adult) kids’ age group use it often in lieu of a PC (ie for tasks that their parents would do on a PC), and increasingly treat this less as a novel technology and more like their parents would treat a PC.

    If any of this is correct, then we should expect iPhone sales to increasingly reflect PC purchasing patterns, outside of new and emerging markets, barring a major hardware upgrade or a compelling iOS upgrade that can only be exploited on the new models. I’m not sure that any of the iPhone variants in the current refresh cycle meet that bar.

  • I agree, it’s likely launching the top end model and then the economy version later wasn’t the best idea. Not only did it look a bit lame in comparison, but there would also be a bit of impatience. “That XS looks awfully good, but I wanted to wait for the one I know is cheaper, aw heck, let’s just get an XS now.” Both would have cut into XR sales.

    However there is another factor as well. Since summer many economic signs have been suggesting rough times ahead. The markets are down. FANG stocks especially are hard hit. There’s more and more talk of tariffs, which if nothing else will drive costs in the US up. Some companies are downsizing, GM was only the most obvious and recent. There has been a slow but steady increase in fear. The iPhone XS/Max rollouts happened when the clouds were just starting to gather. The XR came out when uncertainty was much more pronounced. More and more people, in my circle at least, are talking about a more modest Christmas this year.

    I suspect part of the weakness is that Apple and especially the XR got caught on the wrong side of economic events. For a lot of people a $800 phone is just a stretch right now.

  • I use iPhone 6 and my wife uses the 6s. It would cost nearly $2000 for both of us to upgrade. Are phones are working fine. It is hard to justify such a cost when there is no real need. We would go with the Xr if we upgraded.

    You probably have seen the offer Apple of an extra $100 on trade ins of older iPhones like ours. That brings the cost for us to upgrade closer to $1500. Still not convinced. Perhaps this offer is just another piece of evidence of softening in sales. In that it comes directly from Apple to us; it probably says something about this.

    1. We’re in the same boat. Thought about updating, but aren’t going to. My wife has a 6 and I have an SE. To replace both would be in the ~$2000 range. (Side note, yes we could get a 7 or an 8 for less. But those are old technology and will go obsolete and stop getting updates that much sooner. When we do update we want the latest which will last longer.) We thought about updating but just can’t justify it. If we could do it for ~$1000 we might, but the phones are working and until that stops we just aren’t going to drop that much on them. For the same reason we aren’t getting Apple Watches this year. The AW4 really had me excited, but for a pair of them it would be ~$1100. Just not going to do that.

    2. Exactly. I cannot see how any phone could be more effectively useful at a very high end than the iPhone 6+. The only way to get many users to upgrade will finally to force them to by built-in faults or applied obsolescence through software “upgrades” which break the phone’s usability.

  • Smaller iPhone ( i.e the iPhone SE , 8 ) tends to be much more popular in Japan, while the larger 5.5 / Max tends to be popular in China.

    Xr is in the middle of no where. It is too small for majority of Japanese Market, Not big enough for majority of Chinese Market. And the market is taking its time to adjust for the size changes.

    And in case people are thinking that is just two market, the Chinese Region and Japanese together represent more than 30% of Apple Shipment.

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