SSDIY Samsung SDI Company Ltd (PK)

By Takashi Mochizuki 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 23, 2018).

TOKYO -- Less than a month after releasing the iPhone XR, Apple Inc. is moving to offer subsidies to mobile-network operators in Japan to shore up sales of its least-expensive new smartphone, people familiar with the matter said.

The de facto discount of the handset in Japan, coupled with deep cuts in global production plans for the XR, are a sign of limited enthusiasm among consumers for the model, which has fewer features than Apple's other two new releases and costs more than still-popular older models like the iPhone 8.

Major wireless carriers in Japan plan to cut iPhone XR prices as early as next week, people with direct knowledge of the plan said, without giving details of the extent of the cut. Japan is one of the most lucrative markets for Apple, which showed a 46.7% share of the Japanese smartphone market in a survey conducted by MMD Labo from July 31 to Aug. 1.

The XR is available in Apple stores in Japan from about $750, but carriers' pricing is more opaque as phones are bundled with data plans.

It isn't known whether the Cupertino, Calif., company plans to offer similar programs in other regions. Apple declined to comment.

Apple has used marketing dollars before to discount certain iPhone models and drive sales, viewing it as a lever to manage inventory, according to people familiar with its sales and production tactics. During the iPhone 6s cycle, Apple cut production on one model then offered carrier and retailer discounts to help reduce excess inventory, one of these people said.

When extending discounts, Apple has typically chosen to do so on phones made for specific markets because the cost is less than having to reconfigure the device for resale in another market, this person said.

The Wall Street Journal reported earlier this week that Apple has slowed production plans for all the three models released in recent months, with some drastic chops made on least-expensive XR models.

Though it has been done in the past, officials at Japanese carriers say it is rare for Apple to cut the price in their market on a recently launched handset.

"A price cut within a month of the release is rare not just for Apple but for smartphone makers in general," said a senior official at a wireless operator, who monitors sales.

Analysts say weaker-than-expected demand for the iPhone XR may mirror what happened with the iPhone 5c in 2013, where sales picked up the following year. Apple's higher-priced XS and XS Max models, released in September, appeal more to tech's early adopters who typically fuel initial sales of new iPhones.

Some Japanese consumers say the XR's price, while considerably below the XS, is too high for the sacrifices in display quality, number of camera lenses, and slower data-transmission speed.

Apple's iPhone 8 has remained hugely popular in Japan for those looking for an affordable Apple handset, because it is cheaper than the XR and remained available when the XS and XS Max were released.

Apple suppliers have also recently resumed making the iPhone X, the 2017 model that Apple had stopped selling at its own stores, people familiar with the matter said.

In the past, Apple has produced legacy models for select markets where there is enough demand for those devices, the person familiar with Apple's sales and production tactics said. The company views it as a way to fuel sales and boost margins, as the components often cost less and manufacturing equipment has depreciated, he said.

People involved in the supply chain said the resumption of the X is due in part to Apple's contract with Samsung SDI Co., a major provider of iPhone X's organic-light emitting diode display, or OLED, panels. Apple needs to buy a certain amount of the panels from the South Korean maker, and given the cut in XS and XS Max, Apple is trying to fill the gap with the old device, they said.

Apple and Samsung SDI declined to comment.

Tripp Mickle in San Francisco and

Yang Jie

and Yoko Kubota in Beijing contributed to this article.

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com

(END) Dow Jones Newswires

November 23, 2018 02:47 ET (07:47 GMT)

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