iPhone 8 a Flop? Demand Seen Falling

Apple's iPhone 8 might have only hit store shelves a few weeks ago, but already there's some concern the smartphone could be facing some problems.

Credit: Apple

(Image credit: Apple)

A study from analysts at KeyBanc Capital Markets says Apple's iPhone 7 models are actually outselling the iPhone 8. In a note to investors KeyBanc's John Vinh said that "a meaningful portion of customers are buying iPhone 7 in lieu of the iPhone 8." He attributed the buying decisions to the iPhone 8's "lack of significant enhancements."

Vinh's comments were followed by a Reuters report on Thursday (Oct. 19) that cited an Economic Times report, claiming Apple has cut its iPhone 8 order plans by as much as 50 percent.

Apple's iPhone 8 might also see its sales stymied by its iPhone X, a smartphone that will be launching next month and has prompted some customers to hold off on buying a new iPhone until it's available, the analyst said.

"I can’t say definitively whether demand is soft but I would not be surprised if it were," said Lynnette Luna, principal analyst for GlobalData. "Apple left the iPhone 8 design largely unchanged, which doesn’t spur huge upgrades in my mind. But the iPhone X is a leap, and those who want the latest new iPhone design are likely opting for that one."

Apple announced the iPhone 8 and iPhone X at a press event last month. While the company did its best to pitch the iPhone 8 as a desirable option, featuring an enhanced glass design, superfast A11 Bionic processor, and new wireless charging, customers seem to be more interested in the iPhone X. Apple's iPhone X offers a boatload of enhancements, including an all-new design, the first OLED display from Apple, and a new facial-scanning feature called Face ID.

MORE: 5 Reasons I'm Skipping the iPhone 8 for the iPhone X

Analysts who picked up on the Economic Times story and spoke to Reuters about Apple's decision said the company is indeed seeing that demand might be heavier for the iPhone X than the iPhone 8 and has decided to shift its order focus to its new device.

According to Rosenblatt Securities analyst Jun Zhang, Apple had initially planned a production mix of 50/50 between the iPhone 8 line and iPhone X. Now, through, Zhang believes Apple is allocating up to 70 percent of its production plans to the iPhone X.

Historically, iPhones have sold out rather quickly when offered for pre-order. Last month when the iPhone 8 was offered, however, many units were still available. There were also units readily available on its launch day. It was the first time Apple hasn't been hit with widespread sellouts of new handsets.

But perhaps it's not all Apple's fault. Vinh, whose comments were earlier reported on by Reuters, said that carriers have also been less willing to offer promotions on the iPhone 8 than they were on the iPhone 7. Customer concerns, coupled with pricing considerations, might be pushing people to the iPhone 7, which is still a fine option in today's market, and it's more affordable.

The big test for iPhone 8, however, might just be when iPhone X hits store shelves on Nov. 3. At that point, it'll need to compete with both the iPhone 7 and iPhone X.

That appears to have scared off investors, who on Thursday pushed Apple's shares down 1.5 percent following reports of poor demand for the iPhone 8. However, Deutsche Bank analysts said that Apple's total production volume hasn't really gone down. Instead, the company has shifted its focus to the iPhone X, which might also deliver a higher profit for the company.

So, while demand for iPhone 8 might be slipping, Apple's profits might grow.