On Wednesday The Wall Street Journal reported that Apple Inc. (NASDAQ:AAPL) suppliers were seeing cuts in production for the iPhone 5C. By the end of the day, however, the newspaper retreated a bit from its earlier report.
Making assumptions about Apple
Apple Insider spotted the changes in the report and noted that it was pretty light on real information. But what’s interesting to note is that the original headline wasn’t that much different than headlines we’ve been seeing virtually every day for weeks. The general consensus is that the iPhone 5C isn’t selling well, but as Apple Insider points out, these reports are pretty difficult to corroborate.
The Wall Street Journal said sources claimed Pegatron was seeing less than 20 percent in cuts for production of the iPhone 5C, while Foxconn Technology Co., Ltd. (TPE:2354) was seeing about a third in cuts. It didn’t say how many iPhone 5C handsets Apple Inc. (NASDAQ:AAPL) had previously planned to build or if the company made changes before launch or as a result of production yields or weak demand.
The newspaper also said Apple increased orders for the iPhone 5S, although it didn’t provide numbers for that either.
Apple trying to broaden iPhone appeal
According to Apple Insider, by the end of Wednesday, The Wall Street Journal’s headline on the story read “Apple’s Dual iPhone Strategy in Doubt.” That shifted the story’s focus away from cuts in iPhone 5C production toward the concept that Apple Inc. (NASDAQ:AAPL) is already failing to broad the appeal of its iPhone by offering a less expensive version.
An Orange executive echoed the same thing analysts have been saying since the price of the iPhone 5C was revealed. The executive said the iPhone 5C isn’t selling as well as previously expected because the price tag is just too high and the iPhone 4S is still a less expensive and attractive option.
Apple’s iPhone 5S more popular than 5C
Some analysts speculate that sales of the iPhone 5C will go up later in the cycle because right now it is big Apple fans who specifically want the iPhone 5S who are purchasing it. But whether that happens or not, it’s clear from various surveys that the 5S is far more popular than the 5C. Estimates from CIRP show that the 5S makes up 64 percent of recent iPhone sales, while the 5C made up 27 percent.
The Journal’s newer version of the story echoed the words of other analysts who said that a better iPhone mix toward the 5S is good for Apple Inc. (NASDAQ:AAPL) because it means a higher average selling price.
The problem with speculating from Apple’s supply chain
Apple Insider goes on to point out past incidences when there were problems with conclusions drawn from supply chain checks. Specifically, the problems appear to be in connection with suggesting that Apple Inc. (NASDAQ:AAPL) is cutting or increasing builds for its devices.
CEO Tim Cook has warned media outlets in the past against writing stories based purely on supply chain checks. He said that their supply chain is very complex, and numerous stories have made suggestions “based on supply chain checks” which later turned out to be false.
Apple’s products being discounted
We’ve also hear reports that retailers have been slashing the prices of Apple Inc. (NASDAQ:AAPL)’s iPhone 5C, possibly because of weak demand. But as Apple Insider notes, it’s not uncommon for the company’s retail partners to slash prices, although Apple itself hasn’t historically cut prices on devices which weren’t selling well.
Apple Insider suggests that Apple priced the iPhone 5C correctly because if the price was any lower, retailers would have seen even slimmer margins on the handset and been unable to offer their own discounts on it.