Apple cuts orders of iPhone 5C as consumers prefer 5S

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 <4938.TW>, 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 <2317.TW> 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 <005930.KS>.

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. (Additional reporting by Poornima Gupta and Soham Chatterjee; Editing by Ryan Woo, Rodney Joyce and David Gregorio)

Matches

MORE TOP STORIES TODAY

Pietersen may play against Hyderabad

Pietersen may play against Hyderabad

As much as Pietersen's availability is a boost, the loss of a potent death bowler might sting Delhi badly. More »

Struggling Mumbai need batting fuel

Struggling Mumbai need batting fuel

Mumbai have explosive hitters down the order in the form of Corey Anderson and Kieron Pollard, but the lack of contributions from them has compounded their… More »

Boycotting IPL will not save cricket

Boycotting IPL will not save cricket

Boycotting the IPL as a means of protest against the grime in the game may not yield the desired results. More »

Atapattu appointed Sri Lanka interim coach

Atapattu appointed Sri Lanka interim coach

Among Atapattu's major challenges will be accounting for the knowledge England already possess of the Sri Lanka team, through Paul Farbrace's England … More »

Srinivasan's ICC presence to be challenged

Srinivasan's ICC presence to be challenged

Srinivasan, who has been replaced by the court as board president, was named the BCCI's representative to the ICC last September. However, that position… More »

Brilliant Maxwell powers Punjab’s renaissance

Brilliant Maxwell powers Punjab’s renaissance

Maxwell has easily been the best player on display in the first nine days, with scores of 95, 89 and 95 helping Punjab shed their image of also-rans and… More »

Bangalore lose nerve, lose game

Bangalore lose nerve, lose game

IPL 7, GAME 11—Vinay's over, Lynn's catch turns last-over finish in KKR's favour. More »

Indian cricket is now dope-free

Indian cricket is now dope-free

The BCCI conducted over 200 dope tests during senior domestic tournaments in the just-ended 2013-14 season – the largest number of tests done by an ICC… More »

T20 is all about the little things: Balaji

T20 is all about the little things: Balaji

Balaji acknowledged Maxwell’s role in Punjab’s great start to season seven, but he insists that the efforts of other players like Virender Sehwag, among… More »

Couldn't turn down ECB offer: Farbrace

Couldn't turn down ECB offer: Farbrace

England's new assistant coach Paul Farbrace admitted that it was impossible turn down the job even though he will have mixed feelings when he faces… More »

Cleaning up the game starts with fans

Cleaning up the game starts with fans

... because, as recent events reveal, the BCCI has little intention of doing it. More »

Is Srini group delaying BCCI meeting?

Is Srini group delaying BCCI meeting?

The group opposed to Srinivasan alleged that since BCCI secretary Sanjay Patel belongs to the president’s group, he was intentionally delaying the SGM… More »

Jadeja spins out Rajasthan in close chase

Jadeja spins out Rajasthan in close chase

IPL 7, GAME 10—Chennai beat Rajasthan by 7 runs after last-over scare. More »

Atapattu likely to be SL interim coach

Atapattu likely to be SL interim coach

Sri Lanka's chief selector Sanath Jayasuriya issued the strongest indication yet that Marvan Atapattu would be appointed coach for the tour of Ireland… More »

Vithanage, Priyanjan get T20 call-ups

Vithanage, Priyanjan get T20 call-ups

Herath has been rested, while the team will be without the veteran pair of Mahela Jayawardene and Kumar Sangakkara, who retired from T20 internationals… More »

'BCCI should have picked panel with care'

'BCCI should have picked panel with care'

Dalmiya said that it was the first time that the BCCI had been faced with a situation where the apex court had hauled up the Board and it should have acted… More »

'Gambhir will strike form soon'

'Gambhir will strike form soon'

Gautam made an eight-ball duck in the opening game against Mumbai and in the second game against Delhi, he lasted only half those balls. More »

SL in 'difficult place' after Farbrace exit

SL in 'difficult place' after Farbrace exit

Sri Lanka depart for assignments in Ireland and England in two weeks, and Sanath Jayasuriya suggested Marvan Atapattu would be interim head coach for those… More »

Chandimal axed as T20 captain

Chandimal axed as T20 captain

Sri Lanka's cricket selectors on Wednesday sacked Dinesh Chandimal as Twenty20 captain and replaced him with Lasith Malinga, while Angelo Mathews was… More »

Farbrace is England's assistant coach

Farbrace is England's assistant coach

The ECB continued the restructuring of the England coaching set-up on Wednesday by announcing the appointment of Paul Farbrace as assistant coach. More »

SC asks Mudgal committee to continue

SC asks Mudgal committee to continue

Mukul Mudgal has communicated to the court his willingness to take up the investigation and has been asked to specify the terms and modalities on April… More »

Sri Lanka players resolve pay dispute

Sri Lanka players resolve pay dispute

The pay dispute between Sri Lanka Cricket and its 13 contracted players ended on Wednesday when the latter agreed to accept 10 percent of the participation… More »

Hope to be fit for next game - Pietersen

Hope to be fit for next game - Pietersen

With two heavy defeats at the hands of Bangalore and Chennai, Daredevils currently languish near the bottom of the table. More »

'SC decision could hurt BCCI's status'

'SC decision could hurt BCCI's status'

The Supreme Court prefers that the Justice Mudgal panel further investigate the IPL corruption scandal. More »