Just a month after the launch of its two new iPhones, Apple Inc reportedly cut production orders for iPhone 5C. According to well-placed sources, Hon Hai Precision Industry Co, one of the company’s major assembly contractors, disclosed that Apple reduced its orders for the cheaper iPhone model by a third within the period.
Another assembly contractor, Pegatron Corp, also reportedly received a request for production reduction for iPhone 5C. According to sources, its orders were reduced by more or less 20%.
Interestingly, this may not mean bad news for the Apple. That is because the company has increased production orders for the premium iPhone 5S at the same time. iPhone 5C and iPhone 5S were launched and released simultaneously last month.
Two reasons for order cuts
There are two main reasons that are cited for Apple’s decision to alter its production orders for the last three months of the year. First, demand for iPhone 5C has been lackluster since its release. In contrast, there has been scarcity in supply of iPhone 5S as many consumers lined up to buy the unit, especially the rare gold versions.
Second, Apple may have realized that the cheaper iPhone 5C may possibly erode margins as it may eat into sales of the premium version. In general, Apple may stand to generate more profits from the more expensive smartphone. By lowering supply of iPhone 5C, the company may possibly prompt consumers to prefer to buy the costlier iPhone 5S.
Interesting quarter for Apple
Apple expects to sell about 33 million to 36 million units of both iPhones in the current quarter. It is also possible that the estimate may drastically rise to more than 50 million units. That is not surprising as sales usually become more robust during holiday quarters like this. The fourth quarter would also mark the initial full quarter that the new iPhones would be sold in the market.
The company is set to launch a new lineup of iPads on October 22. This may mean higher revenue for Apple this quarter as sales of its tablets combine with strong revenue figures from the new iPhones. This would be an interesting time for Apple. Over the past year, it had come under pressure to boost sales of both iPhones and iPads. It also obviously aims to defend and regain its market share over rivals that are raising their capabilities by taking advantage of lower prices.