updated 07:25 pm EDT, Thu September 26, 2013
Limited supply of 5s, lower price, solid construction may have boosted 5c
Although the media tended to focus on the high demand for the groundbreaking iPhone 5s -- and early reports have claimed that the 5s outsold the colorful iPhone 5c by a factor of 3:1 -- a well-connected analyst told his clients he believes the ratio of sales between the 5s and 5c was closer to 1:1, with only a slight favoring of the higher-end model. Apple has not broken down sales by model, but reported that nine million new iPhones were sold over the opening weekend.
For a variety of reasons, Ming-Chi Kuo of KGI estimates that between 3.5 and 4.5 million of those were the iPhone 5s, with the remainder (up to 5.5 million) being the iPhone 5c. While many buyers who ventured out and pre-ordered during the opening days may have been contemplaying the 5s, upgrade costs or lack of 5s availability may have persuaded many to buy the iPhone 5c instead. A number of reviews -- including our own -- have mentioned that the device is far more impressive in person than in photographs.
In pictures, the colorful polycarbonate back of the iPhone 5c is the focal point, but makes the phone look more slippery, softer and cheaper than it does in real life. An interior steel frame (which doubles as an antenna) and precision manufacturing and polishing give the iPhone 5c a hefty and solid feel that communicates the quality of the build in the same way the iPhone 5 did last year.
Kuo's estimates take into account the ongoing shortage of the iPhone 5s as a factor, but undoubtedly also bank on the rush of upgraders who have waited patiently to get out of their contracts and exchange their older iPhones -- the 3GS and the iPhone 4 primarily -- for something more advanced yet affordable. The iPhone 5c, while not significantly advanced from the iPhone 5, remains a big step up from a 3GS or 4 and offers both some minor improvements, a new operating system the 3GS can't run, and a more fashionable, distinct look that is prized by younger, more trend-conscious demographics.
The analyst was among the very few who correctly told investors that Apple would be retaining the iPhone 4S as its "entry level" phone rather than the iPhone 5 as would have normally been the case. In hindsight, the move was more obvious than it was in the run-up to the public announcements -- the 4S is both visibly and technologically distinct from the iPhone 5-class, while the iPhone 5c and the "old" iPhone 5 co-existing would have hurt the newer models' sales. Apple surprised many by retaining the 4S' 30-pin connector rather than changing it to be uniform with the smaller Lightning connector now in use on its other iOS devices.
Kuo noted that analytics firm Localytics' figures that showed 3:1 sales of the iPhone 5s over the iPhone 5c disagreed with his estimates, but said their figures were based on activation -- while his include what Apple likely shipped to stores ahead of the launch. "From Apple's viewpoint," he said, "production, sell-in [sales to stores], sell-through [sales to end users] and activation are different things."
He noted that Apple's reports of sales are generally based on sell-through to actual customers, not sell-in to stores -- a big difference from its rivals, that often don't report sales (to stores or end-users) at all and rely on "shipments" to stores instead to inflate their numbers. The "channel fill" was likely to have been comprised of more iPhone 5c than iPhone 5s, according to Kuo.
"Since the iPhone 5s is in shortage now," he continued, "numbers [in terms] of production, sell-in, sell-through and activation should be very close." His comment suggests that shipments to stores and sales to consumers are probably now on equal footing -- another way of saying that Apple is selling every iPhone they can make about as fast as they can make them.
Adding to his credibility, Kuo also predicted that Apple would sell eight million iPhones on its opening weekend -- one of the highest and most optimistic estimates amongst the punditry. Apple's nine million sold beat even his projection, but Kuo was considerably more accurate than some others, who missed the mark by as much as five million units.
Kuo was also among the few to predict the iPhone 5c's hybrid plastic casing, and that its contract-free price would see only a slight reduction in price -- between $450 and $550 -- sacrificing some share to gain higher profitability as far back as July. The base iPhone 5c does indeed cost $550 contract-free.
He added in his note to investors that he expects iPhone 5s supply to slowly increase, particularly for the highly-constrained gold model. By the end of the next quarter, Kuo said, the iPhone 5s will again become the "main contributor" Apple's holiday sales total. The iPhone 5c, he told investors, would sacrifice some market share "for profitability."