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Apple Reportedly Lowers Component Orders for iPhone 5

Apple Reportedly Lowers Component Orders for iPhone 5
January 15, 2013 9:52AM

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"iPhone 5, apart from eye-catching design aesthetics, has nothing revolutionary compared to the efforts competition is putting in their devices," said analyst Neil Shah. "The competition is way beyond Retina resolution, dual-core processors and hundreds of thousands of apps in the App Store." Apple reportedly has cut supply orders for the iPhone 5.

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In a sign that it's not only lonely but precarious at the top, Apple saw its share price drop on Monday following a report that the computer giant and smartphone king has lowered component orders for the iPhone 5. That suggests the handset has been received with less enthusiasm than its top-selling predecessors.

Citiing "people familiar with the situation," The Wall Street Journal said orders of the 4-inch displays for the iPhone 5 -- the largest of any model -- have been cut to "roughly half of what the company had planned to order." Other component orders also were reportedly decreased.

Tough Act To Follow

The report cited the growing popularity of Samsung's premium smartphones, such as its flagship device, the Galaxy S III, as well as competition from cheaper Chinese makers as likely factors for Apple's slippage in market share, though its iOS platform retains the No. 2 spot after Android-powered devices.

Apple shares closed at $501.75 Monday, down $18.55, or 5.57 percent.

Wireless analyst Neil Shah of Strategy Analytics told us it will be difficult for Apple to keep up with the growth it saw with its 4S device, which introduced the popular Siri voice-activated personal assistant.

"Compared to last year, with the iPhone 4S, Apple expanded to key operators and markets in Asia, such as China and Japan, in the first quarter of 2012, keeping the demand relatively healthy," Shah said.

"Q4 2011 and Q1 2012 together saw 72 million in iPhone shipments. However, with the iPhone 5, Apple has already launched the phone in those markets with most of the demand satisfied in Q4 2012 itself."

As a result, he said, it should come as no surprise that Apple has "hit a ceiling in terms of the combined demand of 75 to 80 million iPhones" for the last quarter and current quarter.

Counterpoint

At least one analyst, however, doesn't believe lower sales are responsible for the reduction in component orders.

Shaw Wu of Stern Agee said his own research suggests that a more stable supply of components after recent shortages means Apple doesn't need to stock up. In a widely reported memo, Wu said he is comfortable forecasting 47.5 million units shipped, higher than the consensus of 46 to 47 million, when Apple reports its latest earnings on Jan. 23.

Not New Enough?

In addition to the larger screen, the iPhone 5 has a faster processor and accesses high-speed, long-term evolution (LTE) data networks.

But as the first iPhone designed without the input of the late CEO and visionary Steve Jobs, some see it as not enough of a leap ahead to convince users of older models to upgrade. It lacks, for example, near-field communication (NFC) for mobile payments or quick file sharing.

"iPhone 5, apart from eye-catching design aesthetics, has nothing revolutionary compared to the efforts competition is putting in their devices," Shah told us.

"The competition is way beyond Retina resolution, dual-core processors and hundreds of thousands of apps in the App Store. Furthermore, the iPhone user interface and features -- though simple to use -- have been aging and losing their 'coolness' quotient."

This makes it harder for Apple to compete with the innovations of Android's latest OS version, Jelly Bean, and Microsoft's Windows Phone 8, and Research In Motion's BlackBerry 10, Shah said.

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