Oct. 16 - Apple is reducing orders for the iPhone 5C, according to a source, which could raise concerns about demand for the cheaper model. But on the bright side, that could mean the 5C is not cannibalizing sales of the premium 5S. Fred Katayama reports.
Apple is cutting orders at its assemblers for its cheaper iPhone 5C, heightening concerns about demand. A source tells Reuters Apple has lowered Pegatron's 5C orders by less than 20 percent, and the Wall Street Journal reports that Hon Hai Precision Industry's orders have been cut by a third. Apple has been criticized for charging too much for the 5C, which was seen as a mainstream phone aimed at taking on cheaper competition. In the U.S., the 5C costs just $100 less than the premium 5s. A senior fund manager at Prudential Financial, Bevan Yeh, said Apple erred with its pricing strategy. "The price differentiation between 5C and 5S is too small. It's an iPhone 5 with plastic casing and isn't worth the price." A survey by Consumer Intelligence Research Partners found that the 5S is outselling the 5C in the U.S. by more than 2 to 1, according to AllThingsDigital. But Apple's stock, which broke back above $500 on Tuesday, rose on the news. On the bright side, the news suggests that the 5C isn't eating into sales of the popular 5S. Before the supplier news came out, Canaccord Genuity analyst Michael Walkley raised his estimates and price target on Apple, saying, "Our global handset sell-through survey work indicates a significantly higher sell-through mix of iPhone 5S versus 5C that should benefit near-term average selling prices and margins." And other analysts say order cuts don't always correlate with poor sales.