Tomahawk, WI 10/16/2013 (BasicsMedia) – Apple Inc. (NASDAQ:AAPL) has been enjoying great returns since it released iPhone 5C and 5S last month. During the first days after launching these products, the company reported that it had sold more than 9 million units. The demand for these new products was expected to reach unprecedented levels before the end of 2013, and this would have a positive bearing on AAPL’s financial results for this fiscal year. Now, there are reports to the effect that AAPL has changed its stand and is putting a cap on the production of iPhone 5C. Why is this happening?

Poor Demand Behind Apple Inc’s Decision to halve iPhone 5C Production

The main reason why AAPL is slashing down on the production of iPhone 5C is due to poor demand. Currently, AAPL has been producing close to 300,000 units of iPhone 5C everyday, but this will be cut down to around 150,000 pieces. It is cutting down on production by close to a half. The limited demand for iPhone 5C is quite interesting bearing in mind that this is the first low-priced phone from AAPL. Consequently, it was expected to attract users who had been buying other low-priced phones from manufacturers other than AAPL. This has not happened.

iPhone 5C is for Emerging Markets

This phone has been designed to cater for the needs of customers from emerging markets. When the company launched iPhone 5C on the same weekend with iPhone 5S, and it was reported that 9 million units had been sold, it should have provided a breakdown of the sales figures for every model. This would have given us a better idea of what to expect going forward in terms of sales. This has opened doors to speculation where experts inside and outside the industry now believe that the figures were mostly for iPhone 5S and that iPhone 5C has never been attractive to users

The demand for iPhone 5C is quite low compared with other high-end Apple iPhones. If you check AAPL’s website, you will notice that iPhone 5C is available within 24 hours of placing an order, while iPhone 5S is only available from October. This shows that there are many iPhone 5C units yet to be bought after production, and are just lying around. Consequently, AAPL has to sell the earlier units of iPhone 5C it had produced, before going ahead to manufacture more pieces. This strategy is quite understandable and I have no problem with it whatsoever.

iPhone 5S is More Popular Than iPhone 5C

The most popular iPhone from AAPL right now is iPhone 5S. It was responsible for up to 64% of all sales by the end of September. It is followed by iPhone 5C which managed to account for only 27% of the sales by end of September. Lastly, iPhone 4S took up the remaining 9% for the same period. Therefore, AAPL is perfectly within its rights to halve the production of iPhone 5C in the hope that it will pick up, mostly in the emerging markets. I am of the opinion that AAPL’s decision to produce a low-priced iPhone was a brilliant move to compete with other brands.

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