Apple Cuts iPhone 5 Component Orders As Sales Fail To Meet Expectations [Report]

iPhone-5-charging

The Wall Street Journal reports that Apple has recently cut component orders for the iPhone 5 due to weaker-than-expected demand. The device enjoyed a successful start when it launched in September 2012, quickly becoming the Cupertino company’s fastest-selling iPhone. It appears, however, that sales since then haven’t quite been what Apple was originally expecting.

Apple’s orders for iPhone 5 displays during the January to March quarter have dropped to roughly half of what the company initially planned to order, according to people familiar with the situation. Orders for other components have also been reduced. The move comes as Apple’s struggle to keep up with Samsung’s smartphone market share continues.

The Korean electronics giant has launched a number of incredibly popular Android-powered smartphones in recent years, and along with Apple, it’s the only smartphone vendor in the United States that’s currently seeing any growth. But analysts have been concerned about how long Apple’s growth can continue.

Its iOS devices, the iPhone in particular, have been hugely successful over the past five years, helping Apple become the world’s most valuable company. However, as the demand for inexpensive smartphones continues to grow, it’s unclear how long premium products like the iPhone can continue to be big players in the market.

In the third quarter of 2012, Apple held 14.6% of the smartphone market share worldwide, which is significantly less than the peak of 23% it enjoyed during the fourth quarter of 2011.

Samsung’s share, meanwhile, rose to 31.3% during the third quarter of 2012, a huge improvements over the 8.8% the company claimed during the third quarter of 2010. And Samsung expects another record operating profit between $8.1 billion and $8.5 billion for the fourth quarter of 2012 — the icing on the cake for the Korean company’s best year in the smartphone business.

It’s possible, however, that Apple may have made larger component orders during the October to December quarter due to earlier concerns about manufacturing difficulties, which could have led to shipping delays. The company may have reduced its order now to clear out some of that inventory.

Nevertheless, analysts aren’t too confident about iPhone 5 demand. Citigroup last month lowered its rating for Apple to Neutral from Buy, and it voiced concerns about iPhone order cuts. “It is unlikely that Apple is cutting orders in a ‘great’ demand environment,” it said.

Numerous reports have claimed Apple will launch a cheaper iPhone before the end of the year, which will be aimed at China and other emerging markets in a bid to secure more market share. However, Phil Schiller, the company’s senior vice president of worldwide marketing, reportedly dismissed those reports during an interview with the Shanghai Evening News.

  • cleversou

    Now Apple can buy back shares as the price lowered :D

  • Hawk_Ky

    A week before earnings huh? Interesting…

  • FriarNurgle

    Stock market manipulation at it’s finest.

  • Atienne

    Hate to say it, but Apple needs a new phone. Large, Medium & Small.

  • Jonathan Ober

    September 2010 first paragraph should be 2012 right? :P

  • BrainGameMayhem

    “The iPhone 5… launched in September 2010.” Are you guys hiring Editors?

  • Robert X

    What a bunch of crap. lol

  • thegraphicmac

    Couldn’t possibly be either A) Speculation, or B) Apple is preparing to update the iPhone line and there are changes to it, so they’re slowing down manufacturing of the soon-to-be-old iPhone 5. Or C) They ordered too much component stock last quarter and are simply slowing down new orders to thin out the inventory.

    Couldn’t possibly be.

  • technochick

    IF they cut orders it is more likely a preset cut built into the system because they know from history that basically everyone buys in the first quarter of release. Well more like 90% of sales are that quarter. So it’s a natural downgrade in sales and not some ‘disappointment’

    But of course WSJ is going to paint a different picture because it gets them more hits, makes them look smarter when the iPhone don’t hit the analysts way off base over the top numbers and makes the writers money from shorting the stock.

  • Harvey Lubin

    “Apple Cuts iPhone 5 Component Orders As Sales Fail To Meet Expectations”

    A record-breaking estimated 55 Million iPhones sold in the last 3 months is “failing to meet expectations”???

    Well I guess your expectations will never be met, if you set them at a realistic “Gazzillion” number. :-P

  • QJeremiah

    Somebody wants to buy stocks at a low price.
    Beacuse around the 30th it will peek… and somebody will sell… making millions…

  • PeterBlood

    This is completely bogus and an incompetent Wall Street misread of what’s going on at Apple. Apple still makes 71% profit share and is ahead in market share in the States by some 12% over Android at 53%. Android dropped YOY 10%. This is short sellers FUD at play.

    http://seekingalpha.com/article/1110321-did-iphone-demand-really-drop-by-50?source=feed

  • SuperJunior

    Fashion tech is dying, and being replaced with real tech.

  • daov2a

    Not really surprised. I found the iPhone 5 to be fast but that speed was too little too late. Apple really needs to do something special with iOS 7 and the iPhone 5G/6. If they do not, then they will begin a long slide down. When I say special, I mean make the changes needed so that jail-breaking is no longer wanted by some, allow me to set a default browser, map app, mail reader or whatever else I want. Make the graphics more intense, maybe a widget option or an NFC chip for sharing. Allow me into the file system without a bit of hacking or a third party app. These are things that make a real OS and not a big brother OS.

    But I digress: iOS is great and so is the iPhone: stellar products to be sure. They just need to really bring back innovation for the product and not just minor tweaks.

About the author

Killian BellKillian Bell is a staff writer based in the U.K. He has an interest in all things tech and also covers Android over at CultofAndroid.com. You can follow him on Twitter via @killianbell.

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