This is the first year that Apple Inc. (NASDAQ:AAPL) has chosen to introduce two new iPhone models. The iPhone 5C was supposed to have generally the same parts as last year’s iPhone 5, but comes in a new plastic casing available in different colors. The new model was supposed to be a step away from the high-end considering its price, and to differentiate from the company’s flagship aluminum iPhone 5S, which exclusively has a TouchID fingerprint sensor for secure access. At the moment of its launch, some market watchers predicted that the iPhone 5C would find greater success in the long run. However, Apple is now reducing its iPhone 5C production.
Foxconn and Pegatron
Recently, Apple lowered iPhone 5C orders to Pegatron Technology by 20 percent and those to Foxconn Electronics by nearly one-third for the 5S. Today, it has been reported that Foxconn will stop production of the iPhone 5C at its factory in Zhengzhou, northern China, and shift the capacity to iPhone 5S, according to anonymous industry sources. However, some say that the company will not stop production of the iPhone 5C but only reduce its weekly output slightly. To this moment, Foxconn has declined to comment.
Foxconn has been Apple’s primary assembly partners for years, while Pegatron “pushed” its way in with a contract to build both the iPhone and the iPad mini. Reportedly, each company will handle about 30 percent of orders for Apple’s iPhone 5C, while the other will take care of the remaining 70 percent respectively. But really, what is the deal with the iPhone 5C?
Apparently, the new plastic Apple iPhone has experienced less-than-stellar sales since it was launched in September. Plus, as we have said before, the “C” in its name does not stand for “cheap.” The price both for selling and producing it are high. Costs associated with the ramp-up in production of this device are reported to have affected Pegatron’s bottom line, as the company reported lower-than-expected 3Q net profits on Monday. Although the order cutbacks have done their share of contribution to this phenomenon as well.
Is that all, folks?
“Weak sales” can be a not so solid argument to support the reason why Apple is really reducing its iPhone 5C production. On the one hand, when reporting its handset business, the company does not break down figures on a model-by-model basis, citing competitive reasons. That means we can’t really know to what extent the sales of the iPhone 5C affect the numbers we see. But do numbers lie? The iPhone 5C and 5S went on sale on the same day and reached sales of 9 million.
Even more, it was reported last week that the company will be adding new suppliers for the iPhone 5C and iPad mini to boost the production in 2014. So, there’s another reason to add as to why Apple has been reducing and redirecting Foxconn’s and Pegatron production on iPhone 5C, rather than just assuming it’s not selling out.