Apple Inc slashes Q4 orders for iPhone 5C, critics slam price point: Source

Written by Reuters | Taipei/Beijing | Updated: Oct 17 2013, 04:17am hrs
IPhone 5cApple Inc manufacturers of the iPhone 5C had orders cut back by as much as 30 pct. AP
Apple Inc has told manufacturers of its new iPhone 5C that it will cut orders of the smartphone for the final three months of the year, a source familiar with the supply chain situation said.

Pegatron Corp, a major manufacturer of Apple Inc's had iPhone 5C orders reduced by less than 20 percent, the source said on Wednesday, declining to be identified because the information is sensitive.

Hon Hai Precision Industry Co, Apple Inc's other manufacturer of the iPhone 5C, has had its orders for the same period reduced by a third, the Wall Street Journal reported.

The iPhone 5C and iPhone 5S were launched in September ahead of the year-end holiday season when sales tend to hit a peak. In the United States, the iPhone 5C is $100 cheaper than the premium iPhone 5S, which retails for $649 for the 16 GB model.

The cut in iPhone 5C orders will reinforce investor sentiment that the phone was overpriced and would not be well-received by consumers, some analysts say.

"This reflects a failure in Apple Inc's pricing strategy," said Bevan Yeh, a Taipei-based senior fund manager at Prudential Financial Securities Investment Trust. "The price differentiation between iPhone 5C and iPhone 5S is too small. It's an iPhone 5 with plastic casing and isn't worth the price."

Spokesmen at Pegatron and Hon Hai declined to comment, while Apple Inc could not be immediately reached for comment.

In China, one of Apple Inc's most important markets according to Chief Executive Tim Cook, the iPhone 5C's reception has been lukewarm. Some local bloggers say the price difference between the iPhone 5C and iPhone 5S is too narrow.

Apple Inc said previously that sales for the iPhone 5S and iPhone 5C in the first three days of their launch in September totalled 9 million, and that demand for iPhone 5S exceeded initial supplies. It did not give separate figures for the iPhone 5C and iPhone 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.

Some analysts caution against correlating the cuts to Apple Inc's supplier orders with poor sales, because of the complexity and opacity of the company's supply chain.

"We've seen this several times. There are too many moving parts in the supply chain to draw any conclusions," said Benedict Evans, who covers mobile and digital media at Enders Analysis, a research consultancy in London.

"We don't know what other suppliers they use or what inventory they already have."