Apple Inc. (AAPL): WSJ Confirms iPhone 5C Orders Being Cut
A couple of days ago, there was a report that Apple Inc. (NASDAQ:AAPL) was limited the production of the iPhone 5C due to weak sales. The Wall Street Journal has confirmed the news as they have checked with sources at Pegatron and Hon Hai Precision (Foxconn). Pegatron and Hon Hai are the two companies responsible for the iPhone 5C production and they have received orders to scale back. The orders are believed to be cut at between 20 and 30%.
Several retailers have significantly cut the cost of the iPhone 5C in order to drive sales for the lower demanded Apple device. Walmart and Target has already reduced the cost of the iPhone 5C by $50.
There are also reports that the iPhone 5S is selling at higher than a 2-to-1 ratio against the iPhone 5C so this will likely mean that Apple is asking suppliers to ramp up iPhone 5S production for the holiday season (especially the gold colored version). Apple sold over 9 million iPhone 5s and iPhone 5c devices during the first weekend of availability.
The reason why Apple released the iPhone 5C was to address potential smartphone buyers in developing countries, but analysts are worried that the slightly lower is not sufficient enough to attract more overseas buyers.
“It is imperative that Apple look to address the lower end of the smartphone market, where we see five times the number of first-time smartphone buyers over the next two years,” stated Sanford Bernstein analyst Toni Sacconaghi. “Even though there may be 100 million to 150 million new high-end smartphone users annually over the next two years, there will be about 500 million new low-end smartphone users annually over the next two years, or about four times the new user total addressable market.”
The Consumer Intelligence Research Partners (CIRP) believes that the iPhone 5C will do better in the future. “Over time, the lower-priced phones have tended to gain share versus the flagship phone, after the initial rush of dedicated upgraders to the newest device,” said the CIRP in an interview with AllThingsD earlier this week.This article was written by Amit Chowdhry. You can follow me at @amitchowdhry or on Google+ at +AmitChowdhry