Apple iPhone 5s Vs. iPhone 5c: Why Suppliers Are Downsizing Production Of The Budget iPhone 5

 @redletterdave on November 18 2013 12:02 PM
iphone-5c-apple
The gap in popularity between the iPhone 5s and iPhone 5c may have to do with consumers' expectations for both Apple smartphones. Courtesy / Reuters

Apple Inc. (NASDAQ: AAPL) is reportedly shifting its manufacturing efforts away from the “unapologetically plastic” iPhone 5c and toward the “forward-thinking” iPhone 5s. According to a report from Taiwan-based DigiTimes, which has been only somewhat accurate in the past, “industry sources” say Foxconn’s massive factory in Zhengzhou will no longer manufacture the iPhone 5c, and instead focus on Apple’s more popular iPhone 5s.

The report also says Apple is cutting down iPhone 5c orders at its other suppliers within Asia. Foxconn handles about 30 percent of all iPhone 5c orders, but Taiwan-based Pegatron is responsible for about 70 percent of all iPhone 5c orders. Reuters and The Wall Street Journal last week said “order cutbacks” from “weak sales” of the iPhone 5c affected Pegatron’s bottom line when the company reported lower-than-expected net profit in its third quarter earnings last Monday.

Why Isn’t The iPhone 5c Selling?

Apple took a gamble with its smartphone line in 2013, opting to manufacture and release two separate iPhone models in a single year instead of just one. The iPhone 5s would be the true successor to the iPhone 5, with an all-metal build and updated chips, sensors and features; the other phone, the iPhone 5c, was originally expected to be Apple’s “budget iPhone” offering, to appeal to those markets that couldn’t readily afford Apple’s popular smartphone with a colorful new style.

The iPhone 5s lived up to the hype (and then some), but the iPhone 5c hasn’t been met with as much enthusiasm. According to Boston-based Localytics, the iPhone 5s was roughly 3.4 times more popular than the iPhone 5c in its first week of availability in the U.S.; similarly, Consumer Intelligence Research Partners told AllThingsD the iPhone 5s has been outselling the iPhone 5c by more than a two-to-one margin, adding the iPhone 5s accounted for 64 percent of new iPhone sales and the iPhone 5c for just 27 percent.

This gap in popularity between the two new iPhone models may have to do with consumers’ expectations for both Apple phones. The iPhone 5s felt new in many ways, especially with its new color options (space grey and gold), its upgraded specs and its useful fingerprint sensor, but the iPhone 5c, which was expected to be colorful and cheap, turned out only being colorful and not so cheap. 

Analysts and investors were surprised and disappointed to learn in September that Apple would not make its iPhone 5c as attainable as many had previously hoped. Rather than being the first-ever iPhone offering that cost $350 to $400 unsubsidized, the iPhone 5c went on sale for $549 without a contract, or the equivalent of $735 in China; selling a more affordable iPhone in China was reportedly a major driving force behind creating such a cheap iPhone in the first place, but it turns out the iPhone 5c will not be the iPhone to finally address the “cost sensitive regions” of the smartphone market, as Bill Shope of Goldman Sachs recently put it to Apple CEO Tim Cook.

“I realize that some people were reading rumors about that the entry phone would be the 5c, but that was never our intent obviously,” Cook said during a conference call with investors following Apple’s fourth quarter earnings report on Oct. 29. “Our entry iPhone is the iPhone 4s and as you know from comments that I’ve made previously we were selling the iPhone 4 in very good volumes and as we began to experiment in different regions at somewhat lower price points we saw a fair amount of price elasticity and so we’re hoping and thinking that, that will continue with the 4s.”

Cook reemphasized that the iPhone 4s is the company’s low-tier smartphone, as that iPhone model is free in the U.S. with any two-year contract, while the iPhone 5c is the company’s mid-tier iPhone, and the iPhone 5s is the high-end iPhone model. It makes sense when you consider the iPhone 5c is the same phone as last year’s iPhone 5, and despite its new plastic feel, the iPhone 5c even improves on a few features from the iPhone 5, including its cameras.

When it’s all said and done, it shouldn’t surprise anyone that Apple is adjusting its manufacturing schedule based on the more popular iPhone 5s. The newer and less attainable iPhone was expected to be more popular regardless, and the iPhone 5c is a reasonable option for those who really don’t want to spend an extra $100 to enjoy a great iPhone experience.

The iPhone 5c isn’t selling because the phone is directing more customers toward the iPhone 5s, which is what it’s supposed to do. The iPhone 5c acts as an incentive to spend an extra $100 to buy the newer and more expensive iPhone because, according to iSuppli, the iPhone 5s actually has a higher profit margins, since the $649 iPhone 5s costs only $199 to build, compared to the $173 it costs to build a $549 iPhone 5c. (For comparison, the iPhone 5, which Apple no longer sells, cost more than $200 to build.)

In many ways, the iPhone 5c is more forward-thinking than the iPhone 5s. It’s unsuccessful now so it can be successful later: When next year’s iPhone arrives, the iPhone 5s will presumably become the mid-tier model and the iPhone 5c will join or replace the iPhone 4s in the low-end tier. Right now, the iPhone 5c is a bit too expensive for customers in the lower tax brackets, but the iPhone 5c will eventually be much cheaper than it currently is, and when that day comes, the iPhone will finally be able to penetrate more markets around the globe.

About The iPhone 5C

The iPhone 5c either replicates or improves upon the features in its predecessor, the iPhone 5, but there are a few noticeable differences. First, Apple has replaced the all-aluminum unibody enclosure of the iPhone 5 with a reinforced polycarbonate solution, and the iPhone 5c will also release in five colors instead of two (black and white), i.e. blue, green, yellow, pink and white.

Inside the shell of the iPhone 5c, most of the specs look identical to those in the iPhone 5. Running on the same A6 chip, the iPhone 5c features the same 4-inch Retina display, the same 8-megapixel camera with 2.4 aperture and single-LED flash, and will also run iOS 7 upon its release. Apple has improved a few features in the iPhone 5c, including the front-facing FaceTime camera and the phone's battery, and the iPhone 5c also supports 13 LTE bands, which is more than any other current smartphone (besides its cousin, the iPhone 5s).

About The iPhone 5S                            

The iPhone 5s features the same 4-inch Retina display and chamfered diamond-cut edges, but the phone also comes with a number of new innards. The iPhone 5s also features a new A7 processor -- with CPU performance 40 times faster and GPU performance 56 times faster than the original iPhone -- and Open GL, just like the new Nexus 7. More notable, however, the iPhone 5s comes equipped with Apple's new M7 chip, which contains all the motion-tracking hardware Apple needs to make its iWatch a reality. By packing so many components into the M7 motion co-processor, including an accelerometer, gyroscope and compass, the M7 can continuously measure motion data for the newest generation of health and fitness apps.

The iPhone 5s also features a slightly modified battery for greater life, a new camera system for slow-motion video photography and a fingerprint sensor called Touch ID, which lets users authenticate ownership and user passwords by simply holding their thumbs on the iPhone’s signature home button. Touch ID is 170 microns thin, it senses 550 ppi and it can scan sub-epidermal skin layers -- what this means is that it's extremely thin and extremely accurate so it doesn't need to force design compromises within the rest of the phone. With 360-degree readability, you can hold your thumb in any orientation and Touch ID can still be read correctly. The entire apparatus within the iPhone 5s contains a tactile switch, the Touch ID sensor, a stainless-steel detection ring and a laser-cut sapphire crystal, which makes it unscratchable. Touch ID can also handle multiple fingerprints, so you can grant access to your iPhone 5s to only certain people.

The iPhone 5s also features a new camera system, which includes a new pill-shaped dual-LED flash and a tighter aperture. The dual-LED flash will help for lower-light settings, but its new camera aperture will also help control the amount of light in each photo. For more on the iPhone 5s, check out our review and hands-on with the seventh-generation iPhone, and learn more about why it's worth the price to upgrade.

What do you think of the iPhone 5s and iPhone 5c? Are you underwhelmed by the iPhone 5s? Let us know your thoughts in the comments section below.

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