Apple takes action to rescue the iPhone 5C market: Zhengzhou Foxconn switches entire production line to 5S

At the beginning of October, retail channels loudly complained that the iPhone 5c was not selling well, and suppliers quietly shifted production capacity from the iPhone 5c; by the end of October, Apple remained silent but internally increased the incentive bonuses for retail channels selling the iPhone 5c. Even though Apple might be reluctant to admit it, the iPhone 5c marketing strategy successfully provided cover for the iPhone 5s to break through, but in doing so, it made a "heroic sacrifice."

Contract manufacturers reducing or shifting production, retailers subsidizing sales, internal price cuts, increasing incentives

Chengdu Foxconn switches all lines to produce the 5s

On October 9, less than 20 days after the launch of the iPhone 5c, Chengdu Foxconn had already started adjusting its iPhone 5c production lines, dismantling and reconstructing several of them. Workers who were constantly around the production lines had already "sniffed" out that the iPhone 5c might just be a fleeting phenomenon. A netizen from Foxconn wrote on Weibo, "Is the iPhone 5c going to stop? Multiple production lines have been dismantled and reconstructed, no longer producing the 5c. Will the long-awaited cheap version for the underprivileged be just a flash in the pan?"

On October 22, an informed source told the IT Times reporter that currently, all the production lines originally used for producing the iPhone 5c at Chengdu Foxconn have completed their modifications, and the modified lines will all be dedicated to producing the iPhone 5s. "Currently, Chengdu Foxconn has six areas with over a hundred production lines all concentrated on producing the iPhone 5s."

The main domestic Apple suppliers are three: besides Chengdu and Shenzhen Foxconn, Shanghai Jabil and Pegatron are the main suppliers for the iPhone 5c and iPhone 5s. Due to the iPhone 5c's sales failing to meet expectations, the order volumes received by Foxconn and Pegatron have both significantly dropped. Just after the launch, Foxconn’s order volume decreased by more than 30%, while Pegatron’s iPhone 5c order volume also fell by about 20%.

According to an industry insider, currently, Jabil and Pegatron have not yet stopped producing the iPhone 5c, but their production capacities have already been significantly reduced. Previously, it was reported that the iPhone 5c's production capacity had dropped from 300,000 units per day to 150,000 units per day, a reduction of 50%. Currently, the production focus of these three suppliers has all shifted to the iPhone 5s.

5c doesn't sell, retailers subsidize shipping costs

No matter how much Apple hyped up the plastic colorful shell of the iPhone 5c, the domestic consumers' lack of interest is the best evaluation result.

It is understood that more than a month after the domestic launch of the iPhone 5c and iPhone 5s, the market demand for the iPhone 5s continues to be insufficient, with all kinds of channel operators busy "grabbing goods." An operator revealed that each batch of iPhones 5s in the Shanghai area generally numbers in the hundreds, but they are snapped up within a few days. Based on current reservation situations, the shortage of the iPhone 5s is at least over 10,000 units.

In stark contrast, the ample supply of the iPhone 5c clearly lacks appeal, causing headaches for various channel operators. An Apple agent revealed that within their distribution range, the total sales volume of the iPhone 5c in the Shanghai area is approximately only 3,000 units, which is several levels lower compared to the previous sales situation of the not-so-good-selling iPhone 5. When discussing this year's full-year "package sales" figures, one of Apple's domestic general distributors refused to disclose, "Once the package sales figure is revealed, the market will know your current inventory level and take the opportunity to pressure prices." The implication is that reaching this figure is still far off.

In the end, third-party retail channels can only "quietly" reduce prices. A person from a third-party sales channel said that the sales situation of the iPhone 5c is very unsatisfactory, "Only able to sell 3~4 units per day," many retailers are quietly lowering prices slightly, "already down to 3500~3600 yuan, basically selling at a loss." Currently, many retailers are using the profits from the iPhone 5s to make up for the losses from the iPhone 5c in order to maintain balance.

Selling one 5c earns hundreds of yuan more in bonus

Despite such a bleak market environment, the "official" price reduction of the iPhone 5c remains far away, "If Apple reduces the price now, it would be slapping itself in the face." Externally, Apple must hold firm, but internally within the supply chain, Apple has quietly adopted a "indirect" price-cut promotion strategy.

For the two major domestic carriers, Apple has a "price protection" policy. According to the policy, as long as the carrier took delivery of the goods within 21 days before the price cut began, Apple will compensate for any remaining stock at the difference in price. This encourages carriers to "move quickly in small steps" — "Goods taken beyond the 21-day period are not included in the price protection, so as long as the quantity of goods taken is reduced, the interests can still be protected."

Meanwhile, facing third-party retailers, Apple's strategy is to increase incentive policies. An Apple distributor told reporters that not long ago, Apple internally increased its incentive policies, raising the reward amount for salespeople selling the iPhone 5c by several hundred yuan per unit, "In fact, it indirectly lowers the cost price of each iPhone 5c."

However, according to insiders, this is already Apple's maximum bottom line, "To get Apple to admit that its marketing strategy for the iPhone 5c was wrong is absolutely impossible."