The California-based tech giant has reportedly slashed the number of screens it wanted in half and reduced orders on other parts too.
Apple is said to have have told its suppliers about the change last month. It will apply to orders from now until the end of March.
Shares of the company dropped dramatically on Monday on news of the sales drop. Apple stock dropped $18.55 a share, or 3.57 percent.
The stock closed at $501.75 - the lowest level it has hit been since February 2012.
The sales claim is one of the most concrete signs so far that the iPhone 5 has not been the hit that Apple hoped.
It comes after Apple has come under intense pressure from Samsung and other phones which use Google’s Android operating system.
Samsung’s share of the global smartphone market rose to 31.3% in the third quarter of 2012, compared to 8.8% in the same period in 2010.
Apple’s slice meanwhile fell from 14.6% down from a high of 23% at the start of last year.
According to the Wall St Journal, Apple may have made particularly large orders of iPhone 5 parts because it was concerned about the quality.
By over ordering they would ensure there were enough replacements to keep customers happy.
When the iPhone launched there were also concerns the three screen supplies - Sharp, Japan Display and LG Display - might not be able to keep up with demand, so Apple could have been stockpiling.
Last month Apple stocks were lowered by from Neutral to Buy by analysts at Citigroup.
In a report on December 16, it said: ‘It is unlikely that Apple is cutting orders in a 'great' demand environment’.
Other analysts have said Apple shares could plunge another 20 per cent amid fears it has run out of ideas.
Many feel that after the death of its founder Steve Jobs, it is just a matter of time before it runs out of steam.
Since Jobs’ death Apple has made some rare missteps that almost certainly would not have happened were he still alive.
Its chief executive Tim Cook admitted the company ‘screwed up’ with the its new maps service which was not as clear as Google Maps and missed out entire areas.
It also launched the iPad Mini even though Jobs specifically said before his death that Apple should never do so.
Another challenger to Apple is Chinese phone giant Huawei which sells cheaper smartphones and is now making inroads in countries such as the UK.
Apple’s stock price starkly illustrates the challenge it faces - it peaked at $705.07 in September but closed on Friday at $520.30.
Meanwhile, South Korea-based Samsung is expected to report that 2012 was its best year ever with profits up to $8.5bn for the last three months.
Apple will report its earnings for the same period later this month.
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