According to a new report from DisplaySearch, Apple has indeed scaled back the production of iPhone 5c by 35% and increased 5s production by 75%. This confirms an earlier report by the Wall Street Journal.
The report attributed the disappointing sales of the iPhone 5c to two factors:
- Apple is a profit-driven company, and decided to raise their price in order to hit its profit target when Chinese carriers cut their subsidies on the iPhone 5c. The selling price of the phone is determined by material cost, target profit margin, and subsidy. The company could have sold the 5c at a much lower price (as the market expected); however, Chinese carriers were aggressively gaining new subscribers through device subsidies during Golden Week (first week of October). If Chinese carriers allocated a higher subsidy to new iPhone 5c subscribers, they would have less to subsidize other brands’ devices. Perhaps Apple miscalculated the launch timing, considering they were aiming at the China market.
- Second, the market’s expectation of what the iPhone 5c would be was very different from how Apple wants to position itself. It was not Apple’s intention to develop a product targeting the “low-cost” smartphone segment. However, rumors about iPhone 5c being “cheap” were circulating as early as Q3 2012. The fact that the iPhone 5c is nearly identical to the iPhone 5 – and is not cheap – disappointed some consumers.
More importantly, the public has made it clear that Apple is and will always be a premium brand company. Consumers are prepared to pay extra for the top of the range Apple devices.
“While the fate of the iPhone 5c is still to be determined, the iPhone 5s is doing quite well, indicating that Apple still has a strong hardcore base for its premium devices,” the report said.