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iPhone 5 sales threaten supply

Line outside the Apple store on Fifth Avenue

Line outside the Apple store on Fifth Avenue as the new iPhone 5 is delivered on September 21. (Getty) Credit: Line outside the Apple store on Fifth Avenue as the new iPhone 5 is delivered on September 21./Getty

Apple sold more than 5 million iPhone 5 smartphones in the three days since it hit stores, but shares sagged as the company struggled to meet demand.

While sales were solid, the company said Monday it had run out of its initial supply and many pre-orders were scheduled to go out in October.

Apple Chief Executive Tim Cook said the company is "working hard to build enough iPhone 5s for everyone."

Expectations for new Apple products were so high - some analysts forecast Apple selling as many as 10 million phone over the weekend - that Wall Street was not wowed by the latest numbers. The stock was down 1.7% at $688.64 in afternoon trading.

Given the demand, Apple, the world's most valuable company, is being closely watched for any supplier problems that may slow down the smartphone production.

"We believe that sales could have potentially been much higher if not for supply constraints," William Power, an analyst with Baird Equity Research, wrote in a note.

Supply limitations are likely to weigh on Apple as the iPhone 5 is launched in another 22 countries on Friday.

To complicate matters, Apple's largest contract manufacturer Foxconn Technology closed a factory in the northern Chinese city of Taiyuan after a riot broke out among 2,000 employees.

Foxconn did not confirm which plants supply Apple, but an employee told Reuters the Taiyuan plant is among those that assemble and make parts for Apple's iPhone 5.

Apple referred questions on the factory to Foxconn. The California company also assembles its devices at factories run by Pegatron.

On the parts side, Apple's key supplier for screens, Sharp, has been struggling with high costs and scrambling to raise funds to pay debt.

Sources told Reuters the company's output of new iPhone displays fell behind schedule.

The early total for the iPhone 5 topped sales of the iPhone 4S, which sold more than 4 million units in its first weekend after Apple introduced it in October 2011.

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