iPhone 5C demand fails to live up to expectations

iPhone maker Apple has reportedly instructed its supply chain to reduce production of its iPhone 5C, as demand for the handset fails to meet expectations.

Unveiled in September, the iPhone 5C is Apple’s attempt to drop down into the mid-price handset space. The 5c, which has a four inch screen, A6 chip and supports LTE was made available for a suggested retail price in the US of $99 for the 16GB model with a contract ($549 without) and $199 for the 32GB model with a contract ($649 without).

Analysts expected Apple to market the device predominantly to emerging markets such as China, where the number of mobile connections is expected to rise by almost 100 million by 2017, according to stats from Ovum. There have been some suggestions however that the 5c pricing isn’t attractive enough given that the 16GB 5s starts at $199 with a plan and $649 without.

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According to news outlets Reuters and WSJ.com, both citing unnamed sources familiar to the matter, Apple has now cut production orders for the device, due to a lack of demand.

However, a lack of demand is not necessarily bad news for Apple, given that prior to the launch of the iPhone 5C and high end iPhone 5S, analysts voiced concerns that sales of the low-cost device may erode into the manufacturer’s margins, as users opt for the cheaper alternative over the 5S.

Deutsche Bank analyst Chris Whitmore explained in a research note: “We believe that iPhone 5S demand is outstripping 5C demand by a significant amount (75per cent to /25 per cent). As a result, both ASPs and margins should benefit from the strong mix within the iPhone product lineup.”