A Blog by Jonathan Low

 

Oct 26, 2017

How Come Apple iPhone X Shipments May Be Only Half of Forecast?

A combination of manufacturing complications from an increasingly complex device - and using scarcity to manage demand. JL

Brooke Crothers reports in Forbes and Jeremy Kahn reports in Bloomberg:

Initial shipments of Apple Inc.’s new iPhone X will total 20 million units. That is only about half the total number forecast the company would be able to ship in 2017. Apple shares fell 1 percent in Frankfurt on the news. The "biggest hurdle" for ramping up volume production of the iPhone X is the flexible printed circuit board for the antenna system.
Forbes
A couple of reports imply the iPhone X will be very hard to get on November 3. I asked around to see what other knowledgeable people are saying.
Backdrop: One batch of media reports on Friday cited KGI Securities Ming-Chi Kuo, who said that only 2-3 million units "will be shipped for sale before the launch on November 3rd." Needless to say, if true, that's only a drop in the bucket. (Preorders for the iPhone X will begin on October 27.) Kuo says the "biggest hurdle" for ramping up volume production of the iPhone X is the flexible printed circuit board for the antenna system, according to 9to5Mac. The report also cited the "wide angle camera circuit board" as a bottleneck. KGI dropped its estimates for fourth quarter iPhone X shipments to 25-30 million from 30-35 million units.
Another report from Japan's Nikkei said on Saturday (10/21) said that Terry Gou, the chairman of key iPhone manufacturer Hon Hai Precision Industry (aka Foxconn Technology Group) and Apple Chief Operating Officer Jeff Williams "are planning to meet" when Williams visits Taiwan later this month. Nikkei cited "two industry sources." The article then went on to reiterate a previous Nikkei report that the 3-D sensor module -- a component inside the iPhone X's notch -- was affecting iPhone X production. Then added this:
A tech industry executive familiar with the 3-D sensor issue said that while the yield rate has improved, it has not reached a satisfactory level...the yield rate for 3-D sensors will not reach a level that will allow suppliers to churn out the iPhone X at their full capacity by the end of October.
--Nikkei (10/21)
iPhone X notch. It's one of the main culprits for the expected production pinch.Credit: Apple
iPhone X notch. It's one of the main culprits for the expected production pinch, though more recently other components have been cited too.
IHS Markit, IDC, and Gartner's take: if you haven't guessed already, the upshot is that many consumers who want an iPhone X in November will have to wait. And that could extend into next year.
Wayne Lam, IHS Markit, Principal Analyst, Mobile Electronics: "well into...2018." "From all indications, Apple will [have] supply constraint on the iPhone X until well into the start of 2018," Lam told me in an email on Friday. "This isn’t all a bad thing as it will drive demand ahead of the holiday season. Strong demand is an indication that Apple [is] still retaining loyal customers despite the...competition."
Jitesh Ubrani, IDC analyst: "Apple will...feel the pinch." "We anticipate very limited quantities at launch as the supply of key components has been constrained," Ubrani told me in an email on Friday. "Even though Apple has typically been very good at managing the supply chain, this is one of the few times they will feel the pinch."
Ryan Reith, IDC analyst: "3.5 million at launch." "We’ve been saying for months now that we expect about 3.5M iPhone X available at launch," Reith told me in an email on Saturday. "We also expected a small quantity available for 2017 given production issues, although recently we’ve heard that a few obstacles have been cleared so this should mean more product availability later in November and December."
Gartner: "unit sales moving into 2018." While I didn't communicate directly with a Gartner analyst, I was referred by Gartner to a research note posted on Wednesday, October 17.  While "Gartner expects Apple's iPhone X to be the sales driver in North America, China and Western Europe, despite its high price," the report added that "given the late November availability of the iPhone X, we expect the iPhone's replacement cycle to flow more strongly into 2018," Roberta Cozza, research director at Gartner, wrote in the note.
While not specifically citing the iPhone X, the research note went on to say: "Component shortages could lead to the inability to meet smartphone demand in the fourth quarter of 2017, further favoring unit sales moving into 2018."
I asked Apple for comment but have yet to get a response.


Bloomberg
 Initial shipments of Apple Inc.’s new iPhone X will total 20 million units this year, Japanese news service Nikkei reported, without saying how it got the information.
That is only about half the total number analyst Ming-Chi Kuo from KGI Securities had forecast the company would be able to ship in 2017.
Apple shares fell 1 percent in Frankfurt on the news.
Nikkei said Apple is struggling to solve technical issues with parts of the phone that support its new face authentication feature. The report said Apple had already begun negotiations with other suppliers to make the problematic components.
Apple declined to provide a comment for this story.
Earlier on Tuesday AMS AG, an Austrian-based electronic components company that is an Apple supplier, released sales forecasts that analysts interpreted as an indication fears about weak shipments of the iPhone X were misplaced. Both AMS and Dialog Semiconductor Plc pared gains following the Nikkei report.

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