Apple Cuts iPhone 5 Part Orders In Half

Apple has cut orders for components needed to build the iPhone 5, according to reports from both The Wall Street Journal and the Nikkei. The news comes on the heels of reports that Apple might be working on a lower-cost handset.

Specifically, Apple has asked Sharp, Japan Display Corp. and LG Display to reduce output of the iPhone 5's LCD panels by about half for the first quarter of 2013. Apple had originally asked for 65 million LCDs. Citing sources familiar with Apple's plans, both The Journal and the Nikkei suggest that the move is being made due to weaker-than-expected demand for Apple's latest iPhone. The change in plans was made last month.

Apple isn't just cutting back on display panels. It has also cut orders for memory chips.

If accurate, the reports would gel with what analysts have been saying with respect to demand for the iPhone 5, which is not selling as strongly as Apple hoped. Its stock price plunged ahead of the market's open on Monday.

[ Will Apple sell more iPhones if it introduces a less-expensive model? Read 8 Ways Apple Could Make A Cheaper iPhone. ]

Apple has not commented on or confirmed any of the reports. It is due to report its most recent quarterly earnings later this month. In the U.S., both AT&T and Verizon reported strong iPhone 5 activations.

Apple's share of the smartphone market has dropped over the course of the last six quarters. According to IDC, it held 23% of the smartphone market in the fourth quarter of 2011, and that had dropped to 14.6% by the third quarter of 2012.

At the same time, Samsung has become a powerhouse, overtaking Apple in smartphones and Nokia in total sales volumes across all types of phones. Samsung owned just 8.8% of the smartphone market in 2010 and held a commanding 31.3% by the third quarter of 2012.

The news isn't all bad: TIME magazine just named the iPhone 5 "Gadget of the Year."

TIME's Harry McCracken said it's all about the design. "The craftsmanship involved in creating the 5's hardware and software gives it its superior slant [compared to the Galaxy S III]. And it's this skilled combination which gives Apple's latest device its world class services."

The design of the iPhone 5 may be quite good, but Apple has handicapped itself by offering only one new phone each year. Samsung, by way of comparison, offers dozens of models each year. Samsung covers every price point, every screen size and every feature.

Whether or not Apple has in fact cut orders for iPhone 5 parts, it may need to step up the number of devices it introduces each year if it wants to continue to compete against Samsung in particular, and Android in general.