WSJ: Apple Cuts iPhone 5c Orders at Pegatron and Foxconn


Apple is reducing orders of the lower-cost iPhone 5c for the holiday quarter, reports the Wall Street Journal and Reuters. This will send a wave of concern among investors, who are likely to take the view that this is a sign of weaker-than-expected demand, and also worry about Apple’s pricing strategy.

The company has notified two of its major suppliers, Pegatron and Hon Hai Precision Industry Co. (Foxconn) that the production of the colourful handset would be slowed. According to the the WSJ, Pegatron will likely see a 20% cut, while Foxconn about 33%.

Apple told its Taiwanese assemblers Pegatron Corp. and Hon Hai Precision Industry Co. that shipments of the iPhone 5C in the fourth quarter would be cut, the people said. Pegatron, which analysts say assembles two thirds of the iPhone 5Cs, was told orders would be cut by less than 20%, said a person familiar with the matter. Hon Hai, which assembles the remaining low-cost iPhones, was told orders would be cut by a third, said two people familiar with the matter.

One component supplier was notified of a 50% cut in orders for iPhone 5C parts, which analysts say could suggest a slowdown in device shipments next year, or mean an inventory reduction by assemblers.

Apple’s action could come as a surprise for some of us, but KGI Securities analyst Ming-Chi Kuo already concluded that earlier last week after performing a market research. The supply of the iPhone 5c appears to exceed demand, and some of Apples retailer partners are selling the handset for less than the initial $99 introductory price.

From what we could see so far, the iPhone 5s sales outperform the lower-cost version iPhone 5c, with reports pointing to “lower-than-expected” sales — at least in the United States. But looking globally, in the 10 countries the iPhone 5s was available at launch, the iPhone 5s outsold the iPhone 5c by 3.7 to 1.

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  • Farids

    It was a bad decision by Apple. I guess they saw how samsung lies to customers( the Galaxy S3 Samsung showed was not what they sold to customers, lied to customers about the performance of their phones/cheating on benchmark numbers, etc.) and gets away with it and figured they can try doing the same. Selling last year iPhone model , in different clothing, for the same price would stop some customers from buying 5c. And raising the flagship price by $100 will cause some customers pause before they go for it. Apple failed to see that they can not sell an outdated phone, in a market where a new phone in introduced by competition almost every day, for the same price 2 years in a row. Customers will gladly buy 5c if it’s priced accordingly, as a year old design and a midrange phone. Prior to this, when Apple released a new phone, they correctly reduced the last year model by $100 and sold the new flagship for the same set price, since 2008. Keeping the old flagship(in new colourful casing) price the same and selling the new flagship for about $100 more was a bad decision. People are not monkeys to get attracted to colourful casings and ignore the insides, especially when every house has internet access and everyone can check reviews and criticism. I’d ask Apple to look at RIM, eh BlackBerry, and learn.

  • Al

    “This will send a wave of concern among investors” …
    I doubt that. More like a wave of relief that Apple is not being stubborn about this flawed product idea and is gradually compensating for its mistake. Of course, investors are likely hoping to soon see an increase in 5s production to compensate (or has that already happened?).