News

New Apple iPhone 5C not cheap enough

New Apple iPhone 5C not cheap enough

iPHONE FLOP? Apple is cutting orders of its new, less expensive iPhone model, after slow sales. Photo: Reuters

By Clare Jim and Paul Carsten

TAIPEI/BEIJING (Reuters) – 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 executives.

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 said.

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 comment.

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 lowering prices.

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 afternoon trading.

Recent Headlines

in Viral Videos, Weird

Police issue tickets for pizza, French fries

17-overlay2

Police in one New Hampshire town are rewarding residents for doing the right thing.

in Viral Videos

‘Fifty Shades of Wayne’ replaces Christian Grey with Batman

22-overlay

We think the Dark Knight should be cast in the sequel.

in Lifestyle

Google wants you to zip line through the Amazon

googleamazon

Wanna go on a zip line without all the harnesses and fear? Just hook your browser through to Google.

in Music

Apollo to mark Billie Holiday’s birthday

billieholiday

The legendary jazz and blues singer will be inducted into the Apollo Walk of Fame on April 6.

in Music

Lars Ulrich celebrates final days as a bachelor

ulrichmiller

The Metallica rocker celebrated his upcoming wedding with Bradley Cooper, Sir Ian McKellen, and his bandmates.