By Clare Jim and Paul Carsten
TAIPEI/BEIJING Oct 16 Apple Inc is
cutting production orders for its plastic-backed iPhone 5C a
month after launch, a source familiar with its supply chain said
on Wednesday, fueling speculation the cheaper model of its main
gadget may have been priced too high.
Apple has asked one of its largest suppliers to increase
production of the top-tier 5S, which went on sale at the same
time, the Wall Street Journal reported. said. Analyst said this
allayed concerns that the cheaper 5C will eat into premium sales
and erode margins.
Apple has told manufacturers it will reduce orders for the
5c smartphone in the final three months of the year, the source
told Reuters. The company added the 5C to the lineup in
September along with the flagship iPhone 5S.
Pegatron Corp, which assembles many of Apple's
iPhone 5Cs, had seen orders reduced by less than 20 percent,
said the source, who asked not to be identified because the
information is sensitive.
Hon Hai Precision Industry Co another major
assembly contractor for the 5C, had its orders for the same
period reduced by a third, the Wall Street Journal reported.
But at the same time, Apple raised orders for the 5S in the
fourth quarter, the newspaper said, quoting two Hon Hai
Analysts said the decision by consumers to spend more on the
pricier 5S benefits Apple. The company's shares rose on
Wednesday, touching a one-month high above $502. Canaccord
Genuity analyst Michael Walkley estimated that the iPhone 5S is
outselling 5C by 2.5 times to 1.
Canaccord Genuity's "survey work indicates a significantly
higher sell-through mix of iPhone 5s versus 5c that should
benefit near-term Average Selling Prices and margins," Walkley
In the United States, the 5C is $100 cheaper than the
premium 5S, which starts at $649 for the 16 GB model.
Spokespersons at Pegatron, Hon Hai and Apple declined to
Analysts and Apple executives have cautioned against reading
too much into supply chain adjustments, which are common in the
fast-moving electronics industry.
Investors will get some idea of the demand for the two
phones when Apple reports its fiscal fourth quarter results
later this month. But the iPhones numbers from July-September
will include sales of only a month of the new models.
HOLIDAY QUARTER BOOST
Apple is expected to sell 33 million to 36 million iPhones
in its fiscal fourth quarter, rising to over 50 million in the
typically strong holiday quarter, which will mark the first full
quarter of sales of the new iPhones.
The holiday quarter may also feature a new lineup of iPads.
Next week, Apple is expected to introduce a updated version
of the tablets that compete with Amazon.com Inc's
Kindle Fire and tablets made by Samsung Electronics.
Apple has come under pressure over the past year to bolster
sales of its iPhones and iPads and defend its market share
against rivals that are rapidly raising capabilities and
The reception for the 5c has been lukewarm in China, which
Chief Executive Tim Cook has identified as one of Apple's most
important markets. Some local bloggers say the price difference
between the 5C and 5S is too narrow.
The price difference could widen next year as Apple is known
for cutting prices of older models to drive volume.
"We're not especially concerned with 5C order cuts at this
point because they appear to be offset by strong demand and
increased production for the 5S, said Brian Colello, analyst
with Morningstar said. "As far as emerging markets, the 5C is
simply not cheap enough to gain traction with customers that can
buy $150 Android devices."
Previously, Apple had said sales for the 5S and 5C in the
first three days of their launch in September totalled 9
million, and that demand for the 5S exceeded initial supplies.
It did not give separate figures for the 5C and 5S.
Prudential, which does not own Apple shares, forecasts
assemblers will ship around 23 million 5C units in the final
three months of this year and 10 million in the first three
months of next year.
Apple shares rose as high as $502.53 at the open on the
Nasdaq on Wednesday and was up 0.6 percent at $501.63 in