Less is not proving to be more for the Apple Inc. (NASDAQ: AAPL) iPhone 5C. Sources contacted by Reuters and the Wall Street Journal claim that Apple has reduced orders for the lower-priced 5C, released simultaneously with a high-priced 5S. The Wall Street Journal‘s sources detailed that Taiwan’s Pegatron Corp., which is rumored to assemble two-thirds of 5Cs, has been told to reduce orders by 20 percent. Hon Hai Precision Company, responsible for assemblage of 5Cs not covered by Pegatron, will scale back its order by a third.
Earlier this week, on October 14, AllThingsD released findings by Consumer Intelligence Research Partners (or, CIRP) comparing sales of the iPhone 5S to the 5C in the United States. CIRP found that after the launch, in September, the 5S represented 64 percent of all iPhone sales, the 5C captured 27 percent of the iPhone market, and the 4S accounted for the remainder.
Josh Lowitz, co-founder of CIRP, while speaking with AllThingsD said that, “After the initial rush of dedicated upgraders to the newest device,” sales of lower-priced phones tend to make up for lost ground. On the other hand, with so little price difference between the 5S and 5C, customers in developed markets, such as the United States end up opting for the slightly pricier option Marvin Lo, an analyst at Mizuho Securities told the Wall Street Journal.
Developing markets are the ones with consumers seeking a less expensive option, and Apple has been under pressure to release a smartphone at a lower price point in order to gain new customers. China, the second-largest market for Apple, is especially important to the company. Reuters calls boosting sales in China a major focus for Angela Ahrendts’s, who will head Apple’s retail and online stores starting in 2014.
In China, the 5C has been received tepidly, and Reuters cites Chinese bloggers who say the price difference between the 5S and 5C did not amount to a substantial difference. The Wall Street Journal gave the unsubsidized prices of the phones in China. The 5S sells for $866 and the 5C for $735. An unsubsidized Android costs around $400.
There are signs from China and the U.S. that both countries are over-saturated with iPhone 5Cs. On Friday, October 11, MacRumors announced that Target was the latest retailer offering a price reduction on the 5C. China Telecom Corp. has taken 700 yuan ($115) off the phones according to the Wall Street Journal. Morningstar analyst Brian Colello appears nonplused so far by weak 5C sales because, as he said to Reuters ”they appear to be offset by strong demand and increased production for the 5S.”
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