When Apple released the new iPhones last month, it adopted a new strategy. The previous norm for Apple was to release a new flagship model and then discount the previous year’s model for bargain customers. This year however, Apple released the new iPhone 5S along with the cheaper, plastic iPhone 5C. Since the release, people have been curious to see how the new strategy would work, and now the initial reports are in: The iPhone 5S is a huge hit, but the 5C doesn’t have the numbers that were projected. According to cnet.com:
“Citing information from “people familiar with the situation,” the Journal reported that supplier Pegatron was told that 5C orders would be trimmed by less than 20 percent. Hon Hai, aka Foxconn, was informed that orders would be reduced by a third. Pegatron assembles around two-thirds of 5C units, according to analysts, with Foxconn accounting for the rest.”
This however isn’t necessarily bad news for Apple. This is not the first time Apple has had to cut production on a unit, and what most people aren’t widely publicizing is that Apple is ramping up production on the new iPhone 5S. As reported by appleinsider.com:
“Seemingly buried in the WSJ article is mention of two Foxconn executives who said that along with the iPhone 5c cuts, Apple has raised orders for the more profitable iPhone 5s. The publication did not elaborate on specific numbers or how they compared to the 5c drawdown.”
When the uptick in orders for the 5S is taken into consideration, this is net good news for Apple, as the 5S is the more profitable model.
It also underscores that this may have been Apple’s strategy all along. There have been huge misconceptions that the iPhone 5C would be a really cheap phone to compete in emerging markets. However, Apple views itself as a luxury brand, analogous to BMW, so releasing a ‘cheap’ product doesn’t fit their brand strategy. As a matter of fact, the more expensive gold version of the iPhone 5S was a deliberate play for markets like China and India, where gold accessories are extremely popular. So it looks like Apple is exactly where it wants to be.
