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.