Sources close to Apple (AAPL) have just released information about plans for the company to heavily increase the production of the iPhone coming into this holiday season. Speculation about this noticeable increase has been directly related to the $200 price cut that the iPhone received on September 5th.

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A source familiar with the latest info says Apple is raising its manufacturing target for the quarter ending Dec. 31. The company had planned to make 1.7 million iPhones in the fiscal fourth quarter ending later this month, and to make 1.54 million iPhones in the fiscal first quarter ending Dec. 31.

Source: TheStreet.com: Apple Boosting iPhone Output

Now that the price cut has been made, sources are saying that the previous estimates of 1.54 million are seriously undercutting the iPhones output potential. In other words, those estimates are more than just conservative, they’ll be downright wrong.

The $399 price tag seems to have helped revive demand, say observers and analysts.

Hopefully this high demand level currently observed wont become subdued as the potential success of the iPod Touch is realized.

Analysts at market research shop iSuppli are calling for shipments of 4.5 million iPhones this year.

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iSuppli’s estimates should be taken with a grain of salt as their numbers seem to leave out the clear speculative nature of foreign sales numbers. Unfortunately, it’s unclear if the increase in numbers will have a direct relation in sales, but the assumption is there.

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