(MoneyWatch) Sales of Apple's (AAPL) newest iPhone models, the pricier 5s and somewhat cheaper plastic 5c, have exploded, with the company saying it sold 9 million units the first weekend the devices were on the market. Consumers also bought up the high-end gold version, while reports suggested that the 5s outsold the 5c two to one.
That's lots of expensive products going out the door -- what's not to love? Well, a Wall Street Journal report that Apple is reducing 5c orders for the fourth quarter, for one. Supposedly, orders will be cut by less than 20 percent at one manufacturer and by a third at another, with one parts manufacturer told to reduce production by half.
Although such a shift might sound like a validation of Apple's highest-tier products, it would indicate a major problem for Apple, suggesting that its effort to push into the lower end of the phone market is falling flat.
There is no doubt that Apple can sell expensive products, particularly in the U.S. Lots of people flock to the devices, which have become fashion and status icons. But while a steady business in high-priced, high-margin items that generate loads of profit seem like a great thing, that strategy isn't sustainable. To keep investors happy, sales have to grow.
But much of the potential growth has been absorbed by companies like Samsung that have turned Google (GOOG) into the dominant smartphone software platform, with a roughly 80 percent market share. One big reason has been cost, with many consumers around the world preferring devices with lots of features but at a lower price than what Apple charges.
The iPhone 5c was supposed to address that problem. It wasn't intended to replace the more expensive 5s, but to supplement sales by appealing to new audiences. So far, however, it hasn't worked, probably because the price is still too high compared to Apple's competition. When the 5c was introduced, Apple was criticized for failing to hit a price point that would make enough of a difference in emerging markets, especially China.
To put it differently, Apple only tentatively undertook a strategy shift that, as a result, may not be working out.