Apple Increasing iPhone 5s Production by 75%, Cutting iPhone 5c Orders by 35%

[somethingelsefl]

Tell that to Android. Massive market share and low profits.

The profit from Android is not necessarily from the OS (and the hardware sales goes to the 3rd parties)...it's with the AD sales...and with that, Google is making tons of profit. Just ask their $1,000 stock price.

Apple is playing a different strategy in the same ball game.

 

[clibinarius]

Uh, not unless they're changing the pricing. The term you're looking for is gross profit.

Nope; it won't necessarily effect gross profit unless the 5S makes more money per unit (and it does) than the 5C.

However, average revenue indeed goes up, as the 5S costs more or the same as the 5C. A product that sells for $650 takes in more revenue than one that sells for $550, no?

However, having a higher average revenue doesn't matter too much, does it?

 

[Rafterman]

A lot of talk about why the 5C didn't do as well as Apple expected. But I think its a lot of over analysis and the answer is quite simple - the 5C was too expensive and too close in price to the better model.

A $99 32GB iPhone 5C (or $299 off contract - not the ridiculous $500-$700 it is now) would have crushed. Even if Apple lost a little money on each one sold, it would have made it back the still massive numbers of 5S sales.

 

[Four oF NINE]

Do you drive a bright pink car, and go to work in pink cloths?

My vehicles tend to be black, charcoal, silver, or white. But that's just me, there's nothing wrong with colors if that's what you prefer. Even pink.

 

[TheKDub]

Nope; it won't necessarily effect gross profit unless the 5S makes more money per unit (and it does) than the 5C.

However, average revenue indeed goes up, as the 5S costs more or the same as the 5C. A product that sells for $650 takes in more revenue than one that sells for $550, no?

However, having a higher average revenue doesn't matter too much, does it?

Yes, average revenue goes up because it's a weighted average. Sell 2 phones, one at $100 and one at $200, avg rev = $150. Sell 3 phones, two at $200 and one at $100, avg rev = $166.67.

Cost doesn't play a factor into revenue calculations so avg rev goes up whether or not 5C or 5S cost more to make. But clibinarius is correct that higher revenue isn't necessarily better for a company if they're losing money on each additional sale.

Gross profit will go up as long as each additional unit has positive profits and you sell more of each unit, but gross margins (gross profits / total rev) might not.

I think gross margins for the 5s is higher than the 5C, so any shift towards more 5s sales will improve margins for apple due to a better mix.

 

[Muk4r0]

Old news with an even older cover with potential refresh

Would you buy an iphone 5 in a colorful 3gs case when the 5s is out ...

Oh well ...

... but, looking six month ahead ( or maybe earlier ) an off contract approach for the 5c would definitely be a most interesting path

 

[Poisonivy326]

I love how people talk about the 5C bring inferior because its plastic when most people have their 5/5S in a non premium, often plastic case so it doesn't get scuffed and scratched.

Yeah but there's a cottage industry of varied plastic cases for those iphones in any color or pattern you want. I think the iphone 5c's colors are just kinda ugly and I wouldn't want to be stuck with them or (god forbid) buying ANOTHER plastic case for it.

 

[alfonsog]

I hate to say it but if they started the 5s at $299 for 32 gig without the $199 16 gig option, that would have got them to sell the 5c for sure. I bet the $199 16 gig is the most popular but they make the least profit on it.

 

[twoehr]

A lot of talk about why the 5C didn't do as well as Apple expected. But I think its a lot of over analysis and the answer is quite simple - the 5C was too expensive and too close in price to the better model.

A $99 32GB iPhone 5C (or $299 off contract - not the ridiculous $500-$700 it is now) would have crushed. Even if Apple lost a little money on each one sold, it would have made it back the still massive numbers of 5S sales.

Not that I've read every post, but I think you've said it most accurately and most succinctly. The only way the market, and the analysts, would accept the 5c as a success is if it were the "free" phone, replacing the 4S. (That is the only way I saw it making complete sense.) Displacing the 5 in the line-up isn't the end of the world, the margin is probably close to/the same as a 5s and better than a 5 at the same price point. So Apple will laugh all the way to the bank in the end.

The ramping down of 5c production doesn't mean much to me. Apple may have intended to do it all along. They aren't a "normal" company that may pay a penalty from their suppliers for such an action. Just like they can command their customers (carriers) to commit to a minimum order and give no quarter, they can dictate to their suppliers when, where, and how much they want. It is almost configure-to-order with the phones. They probably never sit on their books as inventory.

BTW, Best Buy's posted price for the 5s is $x74.95, $25 off, for NEW customers. Does that mean its a failure too? All of these discounts are about marketing, getting people into their store, not "OMG, I have too much inventory!"

 

[9000]

Now, maybe if they had made a black one...

----------

My vehicles tend to be black, charcoal, silver, or white. But that's just me, there's nothing wrong with colors if that's what you prefer. Even pink.

There's a problem with pink clothes if your coworkers don't like the color.

 

[Cruddley]

This is a weird claim. If Apple could have been making 75% more 5s's, they would have done so from day one.

Yeah, I tend to agree. A month in, and I'm still waiting for my 5s (at least through my carrier). I suspect that they were just overly cautious this time round, not knowing how popular the 5c would be, and if it would affect sales of the 5s. It's a pretty tricky thing to release 2 new phones, even though it may seem obvious to us all now. To increase by 75% though...is this just marketing? It's hard to believe that Apple had so little confidence in their new flagship, that they were only prepared to make so few at launch. Something is not right here, that's for sure. I think people have hit the nail on the head with the idea that for just 100 more, people would prefer the 5s, which makes it all the more baffling. Did Apple really OVERestimate the effect of the colour plastic, or as some people suggest, maybe got the pricing all wrong. And surely Apple also realise that most people forking out so much money for a phone, are also looking to put a case on it, as someone else mentioned, and can bring colour to any phone.

 

[Tysknaden]

C 2 will have shell of latex

Then Ive can make a better video.

 

[JerryCards]

My 5s Gold to be scheduled to be delivered Nov, 29th. I ordered through ATT last month. With the increase of production of 5s, hope I can get it a little earlier.

Yeah, I tend to agree. A month in, and I'm still waiting for my 5s (at least through my carrier). I suspect that they were just overly cautious this time round, not knowing how popular the 5c would be, and if it would affect sales of the 5s. It's a pretty tricky thing to release 2 new phones, even though it may seem obvious to us all now. To increase by 75% though...is this just marketing? It's hard to believe that Apple had so little confidence in their new flagship, that they were only prepared to make so few at launch. Something is not right here, that's for sure. I think people have hit the nail on the head with the idea that for just 100 more, people would prefer the 5s, which makes it all the more baffling. Did Apple really OVERestimate the effect of the colour plastic, or as some people suggest, maybe got the pricing all wrong. And surely Apple also realise that most people forking out so much money for a phone, are also looking to put a case on it, as someone else mentioned, and can bring colour to any phone.

 

[chrisrosemusic1]

My 5s Gold to be scheduled to be delivered Nov, 29th. I ordered through ATT last month. With the increase of production of 5s, hope I can get it a little earlier.

Got mine in the UK through EE on an early upgrade - took 4 days to get me stock - it isn't the gold one though.

 

[Cruddley]

A lot of talk about why the 5C didn't do as well as Apple expected. But I think its a lot of over analysis and the answer is quite simple - the 5C was too expensive and too close in price to the better model.

A $99 32GB iPhone 5C (or $299 off contract - not the ridiculous $500-$700 it is now) would have crushed. Even if Apple lost a little money on each one sold, it would have made it back the still massive numbers of 5S sales.

Generally I agree, but what we don't know is what Apple was expecting. It's sales need to be related to the sales the ip5 would have had in the first month of the 5S launch. With that in mind, I think they could well be pleased with 5c sales. Some people obviously are into it, as they have sold some, and not none. The people who have bought one would also know that they could get the flagship model for 100 more... and those that can afford an iPhone can probably afford either. People who are hung up on 100 dollars or euro's over 2 years, are probably not iphone buyers anyway. I think the 4s represents the worst value in their line up, and I would be criticising that first. Mainly because it doesn't really run ios7 smoothly. I have a 4s, and I find myself pressing things 2 or 3 times before anything happens. That has not really happened before on any previous os upgrade, and that kind of makes the 4s the odd one out in the equation.

 

[xofruitcake]

Yeah, I tend to agree. A month in, and I'm still waiting for my 5s (at least through my carrier). I suspect that they were just overly cautious this time round, not knowing how popular the 5c would be, and if it would affect sales of the 5s. It's a pretty tricky thing to release 2 new phones, even though it may seem obvious to us all now. To increase by 75% though...is this just marketing? It's hard to believe that Apple had so little confidence in their new flagship, that they were only prepared to make so few at launch. Something is not right here, that's for sure. I think people have hit the nail on the head with the idea that for just 100 more, people would prefer the 5s, which makes it all the more baffling. Did Apple really OVERestimate the effect of the colour plastic, or as some people suggest, maybe got the pricing all wrong. And surely Apple also realise that most people forking out so much money for a phone, are also looking to put a case on it, as someone else mentioned, and can bring colour to any phone.

heh heh, why is everyone so jumpy about the 35% production cut for 5c? I thought is it just right about correct in a normal launch. Apple started production of 5s in June (serial number of early builded 5s confirmed that). So they probably start producing 5c at the same time. In between June and Oct, Apple need to build enough 5c for inventory + sales through. since Apple normally maintain a 4-6 weeks worth of sales in inventory in the sales channel, that means Apple build 5 to 5 1/2 months of sales in 4 months time frame.. about 25% to to 37.5% of overproduction in the last 4 months. .So if they cut the production of 5c by 35% now, it looks like they are just on target in term of build quantity and sale through is what Apple expected.

And for those advocate Apple to sell 5c at a price any lower, I encourage you to look at the earning report and try to understand the relationship between price, gross margin and earning. If you give out anything for free, it will be immensely popular. Just look at any of the Nexus device that Google sales. They price it so low that it underbid the Android maker version of the same device (e..g Nexus 4 is priced under LG version of the same phone.). Selling mechandize at lower price is great for consumer but it is not a business plan to make money unless they can generate massive amount of sales to compensate the lower gross margin for each device sold. So far no one show any math that will work in that regard. So if you want to argue that Apple should have sold the price at 329, 299, 100 or whatever, please post your math of how the earning will work out better for Apple?

Back in July there is rumor items here about Apple having problem with production of the ring around touch ID sensor. The chemical in the coloring have too much interference and Apple has to scramble to find a different chemical. That seems to fit how 5s launch events so far. The home button ring on space grey dark in color while white and gold 5s has gold color ring. My bet is that Apple over produce space grey while they try to figure out the gold ring problem. So at launch day we have plenty of space grey but very little everything else. Now we have much better white and gold availability but space grey is start to be out of stock in some China city. Foxconn Cheungdu stopped their 5c production and move to 5s production. So my guess is that the shortage will be fixed in a month or so..

 

[Cruddley]

My 5s Gold to be scheduled to be delivered Nov, 29th. I ordered through ATT last month. With the increase of production of 5s, hope I can get it a little earlier.

That's interesting. That's a really long time to wait for stock! Especially with ATT in the states. I would have thought ATT had some sort of priority on stock. I'm also waiting on a gold one, and my delivery estimate in Germany is for 11th November. This is with one of the cheapest carriers too. I suppose it depends on demand, and that differs a lot in different countries I guess. They certainly didn't make enough gold ones, thats for sure! It seems to indicate a lack of confidence by Apple in their gold colour. I was also hoping this ramping up in production might see us getting our phones earlier. Lets hope it's worth the wait in any case.

 

[bpp85]

Dude, you are one guy - all marketing history and statistical research points towards men not being interested in light or pastel shades of the primary and secondary colours, whereas rich or dark tones of the same colours appeal more to men and less to women. This is true in both western and eastern societies.

Well i like the white iPhone 5 or 5s...but i think the problem is not the color of the phone/iOS but the fact that they appear neon. English is not my first language so i don't quite understand what *pastel* means but i see them as neon and i don't like that kind of color

 

[gkarris]

Tim Cook failed miserably on this one. The only people stupid enough to buy a 5c are the ones that are not aware of the millions of colored cases you can add to a 5s

So people who like the 5c more than the 5s (which is the new Blackberry ), are stupid?

 

[GfPQqmcRKUvP]

No it makes sense. I don't see your point.

It's not hard:

Simply changing the production mix doesn't increase average revenue per iPhone sold. It would only satisfy the current demand a bit sooner unless you are suggesting that the supply is driving the demand.

 

[dannynjoni]

That's interesting. That's a really long time to wait for stock! Especially with ATT in the states. I would have thought ATT had some sort of priority on stock. I'm also waiting on a gold one, and my delivery estimate in Germany is for 11th November. This is with one of the cheapest carriers too. I suppose it depends on demand, and that differs a lot in different countries I guess. They certainly didn't make enough gold ones, thats for sure! It seems to indicate a lack of confidence by Apple in their gold colour. I was also hoping this ramping up in production might see us getting our phones earlier. Lets hope it's worth the wait in any case.

I don't know if it's lack of confidence in the color. It may be that Apple wants it to be a "niche" product with the gold iPhone. If you think about it, every now and then they will do this. I don't really think the gold is the image that Apple wants. It may become a bit of a collectors item.

 

[Hastings101]

Yea... if they want to make a cheaper iPhone they need to make it affordable for the target demographic. It's probably smarter to hit ebay up for an in-the-box iPhone 5 than pay for the 5C if you're going to pay that much.

 

[Tysknaden]

Is this a trap for making other users run into breakage of netiquette?

So people who like the 5c more than the 5s (which is the new Blackberry ), are stupid?

 

[See Flat]

Proven marketing:

choice of small popcorn, or large popcorn.
Large much too expensive, so people buy the small.
Stick a medium sized popcorn in there, and all of a sudden, for just a little more money you can get the large popcorn which now seems like a good deal.
People will spend more money if given a comparative choice.

4s / 5c / 5s

no brainer!

 

[Tysknaden]

The C was meant as a replacement for the 4 S - which was selling in high numbers.
The gold is now the symbol for having a new top Apple iPhone. Don't tell me, this wasn't to expect.

I don't know if it's lack of confidence in the color. It may be that Apple wants it to be a "niche" product with the gold iPhone. If you think about it, every now and then they will do this. I don't really think the gold is the image that Apple wants. It may become a bit of a collectors item.