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Apple may cut iPhone 5C Production again while Implementing a New OEM Operating Model Strategy

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As early as mid-October we reported that Apple had notified two assemblers that they'd be reducing orders for the new iPhone 5C and just last week we reported that Foxconn reduced iPhone 5C production to focus on the iPhone 5S. Today, yet another report has emerged claiming that Apple's main iPhone 5C partner is dramatically reducing production.


The new report published this morning states that Apple is rumored to have decreased its orders of the iPhone 5C to Pegatron Technology by over 50% and has asked the Taiwan maker to return some production equipment, according to industry sources. Yet in response to the rumor, Pegatron clarified that its original production scheme remains unchanged.


Pegatron originally landed about 70% of Apple's iPhone 5c orders for 2014, with Foxconn Electronics (Hon Hai Precision Industry) having the remaining 30%. Apple is rumored to have also reduced its iPhone 5c orders to Foxconn, and shifted production lines to the iPhone 5s. However, Foxconn has refuted the rumors. Yet with Apple looking on, you would fully expect both OEMs to publicly refute any such production cut back reports.


New Strategy: Apple adjusts OEM Operating Model


According to Taiwan-based OEMs, Apple has been adjusting its OEM operating model from OEMs being responsible for both component procurement and production, to purely production.


The new strategy is expected to impact Taiwan OEMs' profitability in the long term since some of their profits are generated from their cooperation with upstream suppliers.


Since more suppliers are becoming capable of supplying components for Apple's products, Apple has recently started adjusting its upstream partners in order to preserve more profits for its products.


The change may also be a measure to rein in the recent rash of "upstream supplier" led product rumors.


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