For New iPhone, Slow Start To Output Threatens Supply -- WSJ
September 08 2017 - 3:02AM
Dow Jones News
Shipping delays feared after early setbacks in manufacturing;
will holiday sales suffer?
By Yoko Kubota in Tokyo, Tripp Mickle in San Francisco and Takashi Mochizuki in Tokyo
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 8, 2017).
Apple Inc.'s new iPhone, which is expected to be unveiled
Tuesday, was plagued by production glitches this summer, according
to people familiar with the situation, which could result in
extended supply shortfalls when customers start ordering the device
later this month.
New iPhones typically are in short supply when first released.
But if shortages of the new phone extend beyond the initial sales
period, which is expected to begin Sept. 22, analysts and investors
could dial back their projections for sales in the crucial holiday
period.
The glitches, which occurred early in the manufacturing process,
set back the phone's production timetable by about a month. Foxconn
Technology Group, the Apple contractor that assembles iPhones, has
been ramping up production at its complex in Zhengzhou, China. The
company is paying bonuses to employees who can help bring new hires
on board at its Zhengzhou plant, which Foxconn said in June employs
about 250,000 people.
Apple and Foxconn declined to comment.
There are big expectations for the new iPhone, informally dubbed
the iPhone 8 or iPhone X by industry watchers. Investors, betting
the new phone will rejuvenate Apple's sales after a recent slump,
have pushed Apple's share price to record highs in recent
months.
The new device is expected to have a base price near $1,000 -- a
significant premium over existing models -- in part because of more
expensive components. Analysts' forecasts for initial shipments
vary widely, with some projecting as many as five million units
shipped in the last week or so of September.
Complicating demand estimates for the new phone, Apple is also
expected to release updates to its iPhone 7 and iPhone 7 Plus.
The company said last month that it expects total revenue of $49
billion to $52 billion for the quarter ending Sept. 30, figures
that exceeded some analysts' estimates.
The production delays earlier this summer stemmed in part from
Apple's decision to build new phones using organic light-emitting
diode, or OLED, screens similar to those used by rival Samsung
Electronics Co. At the same time, Apple decided to ditch the
physical home button that contains fingerprint sensors for
unlocking the device. Apple tried to embed the Touch ID function,
or fingerprint scanner, in the new display, which proved difficult,
the people familiar with the process said.
As deadlines approached, Apple eventually abandoned the
fingerprint scanner, the people said, and users will unlock the
phone using either an old-fashioned password or what is expected to
be a new facial-recognition feature. Nonetheless, precious time was
lost and production was put back by about a month, according to
people familiar with the situation.
Apple and its suppliers also ran into trouble manufacturing the
OLED displays. The display modules are being produced in Vietnam by
an affiliate of Samsung Electronics. Unlike the OLED display module
in Samsung's own smartphones, in which the display and touch panel
are integrated, iPhone's display module has the touch panel outside
of the display, said a person familiar with the technology.
The iPhone manufacturing process requires more steps and more
layers of adhesive and protective film than are involved in
Samsung's manufacturing process, the person familiar with the
process said, creating a greater risk of manufacturing error.
A spokesman at Samsung Display, which operates the Vietnam
affiliate, declined to comment.
Apple often has faced supply shortfalls with new iPhones
released since 2008. The last time Apple changed the iPhone's
appearance was in 2014 -- and Foxconn, formally known as Hon Hai
Precision Industry Co., struggled then with low output because of
display manufacturing issues.
--Yang Jie in Beijing and Eun-Young Jeong in Seoul contributed
to this article.
Write to Yoko Kubota at yoko.kubota@wsj.com, Tripp Mickle at
Tripp.Mickle@wsj.com and Takashi Mochizuki at
takashi.mochizuki@wsj.com
(END) Dow Jones Newswires
September 08, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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