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 Local Sports

A.J. LaBree resigns as Sehome basketball coach

Fresh
A.J. LaBree talking to KPUG's Doug Lange at the 2015 WIAA 2A Hardwood Classic at the Yakima SunDome

LaBree spent eight seasons as head coach of the Mariners, earning fourth at 2A state this past season.

in Sports

LeBron James hosting movie screening in Ohio hometown

Fresh
LeBron Schumer Twitter

Bill Hader, actress Amy Schumer and director Judd Apatow are expected to attend the invitation-only screening. James previously worked with Hader when he hosted "Saturday Night Live."

in Local Sports

Taijuan Walker & M’s face Tigers tonight on KPUG

Fresh
Seattle Mariners starting pitcher Taijuan Walker throws against the New York Yankees in the first inning of a baseball game, Wednesday, June 3, 2015, in Seattle.

Walker has been dominant in his last seven starts, allowing only nine earned runs over 48 1/3 innings pitched. The young right-hander is also looking for his sixth straight win.

in Sports

Gasol confirms he is returning to Memphis & AP Source: Lee traded to Celtics

Fresh
Memphis Grizzlies center Marc Gasol (33), of Spain, and Portland Trail Blazers center Chris Kaman, right, watch for a rebound in the first half of Game 1 of an NBA basketball Western Conference playoff series Sunday, April 19, 2015, in Memphis, Tenn.

NBA center Marc Gasol has confirmed that he will sign a new five-year contract with the Memphis Grizzlies. While the AP is reporting that the Warriors have traded David Lee to the Celtics.

in Entertainment

Police search Indy home of ‘Jared from Subway’

jaredfogle

Authorities searched the home of Subway pitchman Jared Fogle, about two months after the executive director of his nonprofit foundation was arrested on child pornography charges.