Apple increases iPhone output post-price cut
updated 07:25 pm EDT, Mon September 17, 2007
Apple boosts iPhone output
Apple's decision to cut the iPhone price $200 has resulted in a subsequent decision to boost output of the device ahead of an anticipated increase in sales. The Street reports that a source familiar with the latest info says Apple is raising its manufacturing target for the fiscal first quarter, upping its current queue of 1.54 million iPhones. Meanwhile, UBS analyst Ben Reitzes raised his iPhone sales estimate to about 3 million for the year, up from 2.3 million previously. "We believe that demand was stimulated almost immediately for the iPhone following the price cut on Sept. 5 and that international partnerships should help sales next year," Reitzes wrote in a research note Friday.
It also appears that the upturn in iPhone production, alongside the introduction of the iPod Touch, is resulting in gains for semiconductor producers and other manufacturers that supply components for the device. An Associated Press report quotes Stifel Nicolaus analyst W. Blake Fischer who said "solid iPod touch or iPhone volumes are most likely to be a positive to the earnings and valuation of Marvell's shares." Marvell makes the Wi-Fi chip for both the iPod touch and iPhone. A teardown analysis of the two devices reveal that the same components largely supply components for both.
The iPhone's price cut also spurred interest in the device among college students. 11% of students surveyed now report that they will purchase an iPhone when their current cell phone contract expires, compared with 4% in August. While college students were initially cautious about the hype surrounding the iPhone, they have now seen how the iPhone performs -- a fact that when coupled with this price reduction, will likely result in a solid sales bump with an even bigger jump upon the next release.
Fresh-Faced Recruit
Joined: Apr 2001
Other way around
I have a theory that this actually went the other way around.
Once Apple had confirmed the device was a hit, after the initial production runs, they knew they could put in much higher orders.
That led to better volume discounts (probably especially on the new touch screen, the cellular chips, and the processor-- since Apple already uses the lion's share of flash memory), which in turn allowed Apple to charge much less for the device.
Remember, the economies of scale go both ways. Sell it for cheaper, and you will sell more-- but build more, and you can build them for cheaper.