Apple Inc. (NASDAQ:AAPL) is just days away from revealing its latest additions to the iPhone line up, and speculation about what is inside the devices is heating up. The company seems set on releasing a lower priced iPhone 5C at the September 10 event, and Stifel has an interesting look into the upcoming device.
According to Aaron C. Rakers and colleagues, who authored the report, the iPhone 5C is going to have the form factor of the iPhone 5, but its internals are going to be straight out of the iPhone 4s. The information was gathered by looking into the supply channels that Apple Inc. (NASDAQ:AAPL) uses to build its iPhones.
iPhone 5 component slump
According to the inquiries of the analysts, Apple Inc. (NASDAQ:AAPL) is slowing down production of the components that it uses in its current top smartphone, while increasing the production of components that it uses in the older iPhone 4S. The 4S is—looking at the company’s older production schedule—due to be downgraded to the lowest priced iPhone the company offers.
Samsung fabricates the custom chips that Apple Inc. (NASDAQ:AAPL) uses in its smart phones. The A6 processor, which is currently only available in the company’s iPhone 5, has seen its production materially ramped down in its Austin fabrication plant.
At the same time, the company’s production of the iPhone 4s chip—the A5 processor—has actually seen production increased. If the analysts’ inquiries bear out, it means that the iPhone 5C will almost certainly have the components used in the iPhone 4s, meaning that it will come in at the lower end of the smartphone range.
iPhone 5C demand
The iPhone 5C is, according to rumor, going to be a cheap iPhone that Apple Inc. (NASDAQ:AAPL) will use to increase sales in developing markets. It is still unclear where the iPhone will be released, and what it will actually cost. Analysts are more worried about the margins on the phone, and whether it will eat into sales of the premium iPhone 5S.
Apple Inc. (NASDAQ:AAPL) will have to persuade analysts in the coming months that it is able to continue its near-dominance at the high end of the market and drive sales in the lower end upward. If margins fall sharply with the introduction of the cheaper iPhone, the company’s shares might suffer.