iPhone 5
iPhone 5 Concept Image

Thanks to the significant decline in phone sales, Apple is planning to cut the production of their current smartphone model iPhone 4s. It’s also reported that Apple will release a brand new iPhone later on this year.

Shaw Wu (analyst from Sterne Agee) recently sent a note to investors. He mentioned his recent check with suppliers where he discovered that Apple reduced iPhone orders between 20 to 25 percent down from the 35.1 million units two from two months ago. He speculated that the significant drop has nothing to with demand, rather it has something to do with the anticipation of Apple’s next smartphone.

If this trend continues on next, it would result in shipment numbers between 26 million and 28 percent million phones, that’s below Wall Street expectations of 30 million to 31 million. Just one year ago, Apple sold 20.34 million iPhones during the June quarter which surpassed analysts expectations which were considerably low at 15.8 million.

According to Wu, Wall Street consensus seriously “underestimated the impact of a pause and inventory draw-down ahead of the iPhone 4S.”

The new iPad, which debuted in stores earlier this, is still showing strength in sales and Wu thinks that trend will continue. He estimates the shipments will increase from 14 million units to 15 million units.

I must admit that it’s a little startling to know that Apple’s much-loved smartphone is lagging in sales. While a part of me is feeling pretty confident that this is just a phase and people will start lining up at Apple stores once the iPhone 5 hits shelves, another part of me is wondering if it’s something more. Perhaps the allure of smartphones has died down just a bit as they’ve become more ubiquitous in the last two years or so. It seems that everyone these days already has an iPhone (or a Google Android model) and perhaps many have just lost interest in a gadget that everyone they know already owns.