Lots of people in Japan and China wear face masks at different times of the year for flu season, pollen season, pollution season, etc. Whatever the reason, Face ID is simply not an option for these people. If it doesn’t work, why bother paying lots of money for a Face ID iPhone model? If Chinese manufacturers are selling under-display fingerprint sensor at a cheaper price than a Face ID iPhone, the choice for a face mask user is a no-brainer.
Whatever the outcome of the China market iPhone rumor, Apple going all in with Face ID has left money and marketshare on the table for others to grab.
Japanese iPhone X users on the daily commuter grind with face masks look like they have finally gotten relief: iOS 12 Face ID supports Alternate Appearances. Hay fever sufferers, high school students and many more people who would never consider using an iPhone X because Face ID doesn’t work with face masks will have the option to do so.
Apple Insider says you can use it to add a second person to Face ID too.
UPDATE I was stupid and posted without actually testing it. Reddit user kazuma_san pointed out that I was wrong and that Face ID/Alternate Appearance simply does not work with face masks. I finally got hold of some masks (not easy when traveling) and tested it. kazuma_san is right and I own him thanks for the correction: Alternate Appearance does not work with face masks. If you try to register with a face mask on Face ID tells you to “Remove the Obstruction.”
Lots of people use masks in Japan, when commuting, at school, for hay fever or flu. Since getting an iPhone X, I use face masks much less now and feel a little naked on the daily commute in Tokyo. One way to mitigate the problem is to turn off Face ID for unlocking iPhone but leave it on for Apple Pay. It works but is not a convenient workaround.
Until the Face ID camera develops the ability to see through scarfs and masks, there will be plenty of demand for Touch ID iPhones in Japan.