Seven Days Into Pre-Orders, the iPhone 8 Is Selling Badly — the Real Problem Is Apple's Product-Line Strategy

Does Apple want more iPhones, or pricier ones?

One more day and the first wave of pre-order customers will start receiving their iPhone 8s.

Most of them are still using an iPhone 6, a 6s, or something older still (annual iPhone sales run close to a third of the installed base, and people replace their phones every two to three years on average).

They probably won't be disappointed by the new iPhone.

The front of the iPhone 8 looks much like the previous three generations, but the new screen is visibly better than the 6s's.

Because it is brighter, what's on the iPhone 8's screen stays legible in midday sun. Indoors, the screen shifts its color tone to match the light around it (in the afternoon, the Kindle app will finally show that warm white background you could never dial in yourself).

The back of the iPhone 8 does away entirely with the glaring white antenna bands, replaced by a single sheet of glass. With that come a better feel in the hand, a new gold finish, and wireless charging.

Thanks to a processor Apple designed itself — this year it took on the GPU as well — the iPhone 8 is much faster than any Android phone. In our tests, it handles complex photos and video twice as fast as Samsung's fastest phone, the Galaxy S8. If you like benchmark scores, the iPhone 8 beats the fastest Android phones by a factor of two.

And then there is the camera, Apple's favorite thing to talk about now; for the details, see our iPhone 8 review.

In short, the iPhone 8 brings bigger changes than either of the past two years' iPhone upgrades.

But iPhone 8 pre-orders are going far worse than last year's.

Interest in the iPhone 8 fell below the 6s two days after the launch event

Last year, by the fourth day of iPhone 7 pre-orders, more than one carrier had already announced record pre-order numbers. A month after the phone went on sale, most iPhone 7 Plus models still took three to four weeks to ship. The popular jet black finish stayed in short supply for months.

This is now the seventh day of iPhone 8 pre-orders. There is no news of records being broken, and if you open Apple's Chinese or American website right now, every model is guaranteed to ship one to two weeks after you order.

On the first day of pre-orders, iPhone 8 Plus shipping times did stretch to three to four weeks, but they dropped back to one to two weeks within days. The likeliest explanation is that scalpers, worried they wouldn't be able to resell the phones, canceled their orders.

Shipping times may say more about how much stock Apple has on hand. But search interest shows the iPhone 8 isn't drawing much attention worldwide either.

Global Google search interest shows the iPhone 8 drew less attention than the 6 or the 7 from the very start. By the third day after the launch, it was trailing even the iPhone 6s.

The iPhone 6s is the only iPhone in Apple's ten years to sell fewer units than the model before it, which forced Apple to spend $2 billion clearing inventory and led to three straight quarters of falling growth.

Analysts have voiced concern about the iPhone 8's future too. That disappointment shows up in Apple's share price. Since the launch event, the stock has fallen 3.36%, wiping out roughly $28 billion in market value.

Interest in the iPhone hasn't actually fallen below where it was two years ago. It has simply been split.

Add in the iPhone X, announced the same day, and you can see that from the second day after the launch, attention moved to the iPhone X.

By the fourth day after the event, global interest in the iPhone 8 and the iPhone X combined had caught up with the iPhone 7.

Baidu Index's historical data isn't as fine-grained as Google's, so day-by-day comparisons aren't possible, but in the week of the launch, interest in the iPhone X matched the iPhone 6 and ran far ahead of the iPhone 8.

After all, Apple kept saying the iPhone X is the future

Starting with the name, Apple has been saying the iPhone X is better than the iPhone 8.

It didn't just skip a name like iPhone 8X; it pronounces the X as "Ten."

Ten sounds bigger than eight.

The iPhone X is the first time Apple has rethought the front of the iPhone. Looking at the line drawings alone, nothing fundamental changed in the iPhone's first ten years:

With its new edge-to-edge design, the iPhone X fits a screen longer than the iPhone 8 Plus's into a body close to the size of the iPhone 8.

The front isn't the only change. The iPhone X also has a new way to unlock it, Face ID, and a new front camera. For how it works, see QDaily's hands-on from the launch event.

Since the first iPhone, the phone has stopped being a phone. It is a canvas for software developers to work on.

Depending on what is on the screen, it can be a camera, an MP3 player, a game console, a newspaper, a television, a translator, anything you might need.

Making the hardware disappear and leaving only that canvas is the ultimate goal of the touchscreen smartphone.

The iPhone has now taken a step forward. But that has little to do with the iPhone 8.

Beyond the product itself, Apple has attached all kinds of symbolic meaning to the iPhone X.

The iPhone X launch was the first time the Steve Jobs Theater was opened to outsiders. The building is a marvel in itself: a huge dome held up by nothing but glass.

It was also the first time in the nearly six years since his death that Apple publicly mourned its legendary founder. The iPhone X was the event's "One More Thing," a nod to Jobs introducing the first iPhone in 2007.

The iPhone 8's price landed in an awkward spot, neither high nor low

Set aside the iPhone X at 8,388 yuan. The iPhone 8 and 8 Plus also cost more than their predecessors: one went from 5,388 to 5,888 yuan, the other from 6,188 to 6,688 yuan.

Component costs and exchange rates account for part of that.

But whatever the reason, there is now a better, pricier iPhone X sitting above the iPhone 8.

For anyone in the habit of ordering the newest iPhone the moment pre-orders open, paying 1,700 yuan more for the iPhone X is not a hard choice.

Figure an average of one new phone every three years. An iPhone X works out to about 7.7 yuan a day for the thing you use most.

Scalpers see it the same way. Someone who works in cross-border telecom told QDaily that over the past week more people have been asking about Hong Kong SIM cards.

They are preparing for possible purchase limits on the iPhone X. The Hong Kong price of the iPhone X is 1,154 yuan below the mainland price. If supply runs short, the early resale markup could be far larger than that.

There is no way to call the iPhone 8 Plus's 6,688 yuan cheap.

If you want to spend less on an iPhone, the iPhone 7 Plus costs 1,100 yuan less than the 8 Plus, and the 6s Plus actually sells for only 4,000 yuan. On the surface, at least, the difference doesn't look big.

According to a July report from the phone-sales research firm GfK, the iPhone 6s Plus was the fastest-growing phone above 3,999 yuan in the Chinese market over the previous two months.

After the price cut, iPhone 6s Plus sales returned to where they were last October, when its replacement had just appeared. There are still plenty of price-sensitive iPhone buyers.

What is not yet clear is whether the iPhone 8 can win over the people who don't follow new products closely but replace their phones for ordinary reasons: a good mood, a dropped phone, an old battery, a theft.

And the iPhone X wasn't ready to appear in September at all

The iPhone 8 and the iPhone X were announced on the same day, September 13 Beijing time.

But one went on sale 10 days later. The other, 52.

The immediate reason for such a long gap is that the iPhone X wasn't ready.

How hard the complicated sensors and screen on its front are to manufacture, we don't know. But the software shows how rushed Apple was.

Every new version of the operating system goes through many test builds before release, and the last one is called the "GM" build. Barring serious problems, it is identical to the final release.

In the GM simulator developers received, the iPhone X didn't even have Apple's own Contacts app; it was added only in the final release. As it happens, the Contacts app's landscape layout needed adjusting for the iPhone X's unusual screen shape.

Right through to the final iOS 11 developer tools, Apple's iPhone X simulator had no home-screen wallpaper and couldn't even open Control Center (on other iPhones you swipe up from the bottom of the screen; on the iPhone X it sits in the upper-right corner).

Because of the iPhone X's screen shape, Apple asked developers to adjust their app interfaces: redesign the title bar at the top, leave white space at the top and along both sides, and so on.

In the final iOS 11 release, most of Apple's own apps were adjusted, but a great many small problems look like the result of rushed work. For the details, see this designer's article.

The last time Apple had trouble like this was iOS 7, when it first abandoned skeuomorphic design.

iOS 7 had to redesign essentially the whole operating system, so some rushing was unavoidable. But iOS 10 was already mature, and for iOS 11 to behave this way again, the likelier reason is that the iPhone X was finalized too late and the software was rushed.

That 52-day gap will directly affect iPhone 8 sales.

In 2010, an iPhone 4 prototype was stolen and sold to the tech blog Gizmodo more than two months before the phone was announced. Steve Jobs went to Gizmodo editor-in-chief Brian Lam himself to get the phone back. Lam asked Apple to state that the device was theirs; Apple refused.

In private, Jobs said outright that this would hurt sales of the current iPhone and was unacceptable. Apple then turned to the courts.

Over the past decade, only the first iPhone went on sale half a year after it was announced. That was because it was the first generation: announcing it could not hurt sales of any existing Apple product, and might hurt competitors' sales instead.

Since Tim Cook, a supply-chain man, took over Apple in 2011, most iPhones have gone on sale within 10 days of being announced.

One possible reason Apple insisted on announcing the iPhone X now, without being ready to ship it in September, is to keep Wall Street happy and hold up the share price.

On last quarter's earnings call, an analyst asked directly whether the new iPhone would fail to arrive in September as it had in past years. Cook answered flatly that the new iPhone would not be late.

Skipping a September event would mean the iPhone 8 missed third-quarter sales. That wouldn't hurt users, but it would hurt revenue and the share price.

Holding the event in September without mentioning the iPhone X might be read as meaning there was only an iPhone 8 this year. That would mislead users, and it would hurt the share price too.

Beyond the share price, another reason may be the iPhone's tenth anniversary: Apple had to produce something that broke new ground.

Samsung, Xiaomi, and a crowd of other Android companies have brought out new designs over the past two years. Apple has always cared a fair amount about what outsiders say about its products. Facing similar doubts in 2013, marketing chief Phil Schiller launched the Mac Pro on stage and said, "Can't innovate anymore, my ass!"

Innovation always carries more risk. As Steven Sinofsky, who used to run Windows at Microsoft, wrote on Twitter when he passed along the news of the iPhone delay: if nothing goes wrong, you aren't pushing hard enough.

Either way, Apple chose to announce in September a product you can't buy until November.

With sales growth stalled, Apple is holding its margin with higher prices

Apple has tried before to reach more people with cheaper products. The iPhone 5c in 2013 and the iPhone SE in 2016 were both attempts at that.

But each time it launched a cheaper product, Apple deliberately kept it at a distance from the main iPhone. The 5c used a plastic shell; the SE used a two-year-old design.

Both attempts failed.

After the iPhone 6, growth in Apple's smartphone sales stopped. The iPhone 7 did better than the 6s, but still worse than the 6.

While the low end went nowhere, Apple extended its price range in the other direction, with more expensive iPhones: the Plus line.

The Plus started out as nothing more than a bigger screen, then added a better camera to set it apart. Today the Plus outsells the standard iPhone.

There is no way to know how Apple arrives at its prices. But judging by the results, the logic looks like this: if pricier phones sell well too, charge more to make up for the missing growth.

Cook has already done this with the Mac. In 2013, the 11-inch MacBook Air got its last real upgrade, at 7,388 yuan. Today the 12-inch MacBook starts at 10,288 yuan, a quarter more.

The iPad, desktop Macs, and Apple TV keep getting more expensive as well. Essentially every Apple product line except the Watch is rising in price.

Apple's market value of more than $800 billion today rests almost entirely on the high margin of one product, the iPhone.

With growth stalled, Apple depends on iPhone profits more than ever, because it has to pay shareholders to keep the stock climbing.

Since taking over, Cook has handed out close to 30% of profits. Once investors have grown used to that, taking it away is hard.

The price changes have also pulled Apple's performance in different markets apart.

In the United States, Britain, and Japan, the iPhone holds close to half the smartphone market.

But in China, the largest smartphone market, iPhone sales keep falling.

Chinese Android brands have taken the low end, and that is not all: from July last year to July this year, the iPhone's share of the Chinese market above 3,999 yuan fell from 77% to 68%.

Older iPhones — "not the best, but a bit cheaper" — don't look able to hold the Chinese market.

In its early years in Europe and America, Apple built user habits around the iPod, iTunes, and the Mac, and out of them a sticky ecosystem.

That ecosystem doesn't exist in most emerging markets. WeChat handles so many needs that even the contacts list is secondary to it, so the cost for Chinese users of switching operating systems is low.

The people who used an iPod and were moved by Steve Jobs's story will grow old. As Jeff Bezos put it, "Every business has to stay young. If your customer base ages with you, you're finished."

An ever more expensive iPhone may carry Apple further and further from young people in most parts of the world.

The worst outcome for Apple would be if the iPhone X, and only the iPhone X, were a huge hit, proving that existing iPhone users will pay any premium. And then 8,388 yuan becomes Apple's new standard.

Charts by Feng Xiuxia.