Is Apple’s iPhone 5C a Failure?

Source: Apple.comApple (NASDAQ:AAPL) has recently cut production of its lower-cost iPhone 5C and ramped up production of its flagship iPhone 5S, wrote two NPD DisplaySearch analysts in a recent blog posting. According to unnamed sources cited by Tina Teng and Shawn Lee, Apple has decreased production of the iPhone 5C by 35 percent and increased production of the iPhone 5S by 75 percent.

The analysts believe that Apple’s rumored iPhone production shift is due to “the disappointing performance of the 5C.” Conversely, they noted that the iPhone 5S is “doing quite well.” Although Teng and Lee failed to provide any evidence for the “disappointing performance” of the iPhone 5C besides their “latest channel checks,” the analysts offered two reasons why they believe Apple’s plastic iPhone has fallen short of expectations.

First, the analysts believe that Apple miscalculated the timing of the iPhone 5C launch in the Chinese market. According to the analysts, the Chinese carriers were in the midst of a seasonal period in which they were already using the majority of their device subsidies on smartphones made by other companies. Since the iPhone 5C was supposedly priced higher than had been expected, Chinese carriers were reluctant to use their limited allocation of subsidies on the iPhone 5C, which made the device too expensive for the Chinese market.

However, according to data from mobile app analytics firm Localytics, cost didn’t appear to be a concern for most of Apple’s Chinese customers. Approximately 91 percent of the new iPhones sold in China during the first 72 hours after launch were the iPhone 5S models.

Second, the analysts cited the overall consumer disappointment with the iPhone 5C’s unexpectedly high price. However, the iPhone 5C price is actually quite low thanks to some competitive pricing among retailers. For example, Walmart (NYSE:WMT) recently announced that it would be selling the iPhone 5C for $45 with a two-year service contract throughout the holiday season.

Although it is impossible to verify Apple’s rumored iPhone production adjustments, investors should have a better idea of how Apple’s devices have been selling when the Cupertino-based company reveals its September quarter earnings on October 28. Here’s how Apple closed out the trading week on Friday.


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