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January 14, 2013

Why Apple Cut Parts Orders for the iPhone 5


For those who routinely follow Apple (News - Alert) product launches, shortages are nothing new. Parts shortages, complete unit shortages and so on are par for the course with the initial days of most any iOS hardware launch that's happened in the last few years.

But there's one thing of which there's seldom a shortage, and according to recent reports from the Wall Street Journal, that particular shortage has finally reared its ugly head.

The Wall Street Journal's report, gained from "people familiar with the situation," said that Apple cut component orders for the iPhone 5 because demand for the device has proven disappointing. The company's orders for iPhone 5 screens for the March quarter are reportedly only half of what Apple had previously planned to order.

Apple, according to these reports, is actually facing what may be a first for the company in some time: a shortage of demand.

Just looking at the situation reveals several possible sources for the reduced demand. One is the clear end of the holiday shopping frenzy; with Hanukkah, Christmas and Kwanzaa all down for another year, demand for consumer electronics has naturally sunk to normal or perhaps subnormal levels. But in something more of a long-term trend, the demand for phones from Apple's competitor and chief lawsuit whipping boy, Samsung (News - Alert), are on an uptrend, as is the demand for Android phones in general.

Apple's market share has been an issue of note for some time, with the third quarter showing Apple's share of worldwide smartphone shipments was just 14.6 percent – down from 23 percent in the fourth quarter of 2011 and the first quarter of 2012.

Samsung, meanwhile, topped out at 31.3 percent in the third quarter – up from just 8.8 percent only two years prior.

Of course, looking at the third quarter does skew things against Apple a bit. The iPhone 5 didn't release until the Q4 2012 – and Samsung had just released the Galaxy S III – so when those numbers emerge they're likely to change the story at least a little.

But there's still something of a sea change afoot. One, some speculation has already emerged by way of a new iPhone release to come as soon as May of this year. As is commonly the case with Apple releases, Apple is staying mum on same until closer to launch. A new iPhone in the works would naturally drive down demand for the older model.

Moreover, Android (News - Alert) devices are rapidly changing to further distinguish themselves from Apple. Samsung models are boasting five-inch screens, and Huawei showed off a phone at last week's CES (News - Alert) that cleared six inches.

The question remains, and a rather disturbing one: Is this the beginning of the end for Apple dominance? Some have suggested Apple's products may be getting a little tiresome with the public at large, as they're getting to look a little too similar from one release to the next. Apple's premium pricing may not be helping matters either.

A growing body of competition and more general issues all look to combine to make 2013 a potentially difficult year for Apple. 



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Edited by Braden Becker
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