Apple Inc. (NASDAQ:AAPL) is reducing production for its colorful iPhone 5C in the fourth quarter, according to a report from The Wall Street Journal based on information from people with knowledge on the tech giant’s decision.
Apple Inc. (NASDAQ:AAPL)’s pricing strategy for iPhone 5C
The move of the iPhone and iPad maker strengthened the previous speculations of some analysts and investors that the pricing strategy of Apple Inc. (NASDAQ:AAPL) for the iPhone 5C will not work.
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Last month, venture capitalist Fred Wilson expressed disappointment towards the tech giant’s iPhone 5C. He said the “C” does not mean cheap as he had hoped, but instead means “clueless.” He emphasized that consumers outside the United States do not buy phones with contracts, which means the price of the iPhone 5C will be significantly expensive. In China, the iPhone 5C without a contract costs $700, compared with $549 without contract and $99 with two-year carrier contract in the U.S.
The decision of Apple Inc. (NASDAQ:AAPL) to cut its orders for the iPhone 5C raises concerns that the demand for the device is weaker than expected for next quarter. The majority of consumers are attracted to the iPhone 5S with the fingerprint scanner. The tech giant increased its order for the gold iPhone 5S.
Apple Inc. (NASDAQ:AAPL) informs producers to cut production
According to sources, Apple Inc. (NASDAQ:AAPL) informed Pegatron Corporation (TPE:4938) and Hon Hai Precision Industry Co. Ltd (TPE:2317) regarding its plan to cut its orders for the iPhone 5C. Pegatron will reduce its production by less than 20 percent and Hon Hai by 30 percent.
In addition, the tech giant also told its component suppliers that it will cut its orders for iPhone 5C parts by 50 percent. Hon Hoi stopped hiring additional workers for the iPhone 5C, according to one of the company’s executives.
In a previous report, Gene Munster, analyst at Piper Jaffray, wrote that the results of his surveys indicated that customers prefer the iPhone 5S. Other analysts observed a similar trend.
US retailers lower prices for iPhone 5C
Some of the U.S. retailers, including Best Buy Co., Inc. (NYSE:BBY), Wal-Mart Stores, Inc. (NYSE:WMT) and RadioShack Corporation (NYSE:RSH) lowered its prices for the iPhone 5C by as much as 50 percent with a two-year carrier contract.
The retail giant further reduced its price for the device from $79 to $45 until the holiday season. Best Buy and Radio Shack offered a $50 gift card for those who want to purchase the iPhone 5C.