Despite Record Sales Quarter, Apple’s iPhone 5c Likely Wasn’t Key To Growth

Apple’s iPhone sales for Q1 2014 have broken the company’s previous record, and they also mark the company’s ability to ship as many smartphones as Samsung, which was previously the only company in the world to move over 50 million units in a single quarter back in 2012. But the number represents only 3 million more devices sold than in the same quarter last year, or around 7 percent growth. That’s a far cry from previous years, and it’s already caught the attention of those watching the company.

This suspicion that the iPhone 5c is not selling quite as well as Apple might have expected is backed up by the average selling price (ASP) of devices. The ASP dropping would suggest that the more expensive iPhone 5s is far and away the stronger seller, which is also supported by Apple CFO Peter Oppenheimer’s assertion on the earnings call that the iPhone 5s faced supply constraints, while no mention was made of the iPhone 5c. They sold more iPhone 5s devices than expected in North America, CEO Tim Cook explained, which made it difficult for them to get the right “mix” and caused the North American market to actually contract year over year. Cook also suggested that changes in carrier upgrade policies negatively affected North American sales.

There are a couple of potential takeaways which could suggest changes to Apple’s iPhone strategy: First, it could indicate that Apple needs to really deliver on the idea of a cheaper iPhone – the iPhone 5c was anticipated to be that, but in the end it was the same price as older devices bumped down the line in previous quarters. Second, it could provide the reasoning behind the recent report from the Wall Street Journal that Apple will ditch the plastic case for any upcoming iPhone devices to be released this year.

Refocusing on the top end and premium metal finishes is one way to address the iPhone 5c, but it’s unclear what effect that might have on growth plans. Emerging markets are still the prime target when it comes to driving continued smartphone growth, and that’s where cheaper devices are going to stand out. Apple may discuss iPhone 5c specifically during the conference call, so stay tuned to find out more.

Apple Q1 2014