Yahoo Finance Apple Inc.'s iPhone X Is Still Insanely Hard to Manufacture
On Oct. 27, Apple (NASDAQ: AAPL) is expected to begin taking pre-orders for its highest-end iPhone, the iPhone X. A week later -- on Nov. 3 -- the first iPhone X models are expected to begin making it into the hands of customers.
It has always been accepted that supply will, in the early innings of the iPhone X product cycle, fall well short of demand. This means that not everyone who pre-orders an iPhone X will manage to get ahold of a device on Nov. 3 -- or even this year.
Unfortunately, per a new report from Nikkei Asian Review, Apple is still having trouble building the components that enable what is arguably the signature feature of the device -- the 3D sensor.
3D sensing troubles
Nikkei, citing a "tech executive familiar with iPhone X production," says that component suppliers are still coping with the difficulty of manufacturing some of the key components that make up the 3D sensor, which Apple markets as a TrueDepth camera system.
Apple says that the TrueDepth is made up of an infrared camera, flood illuminator, and dot projector. Nikkei's source says that the part of the TrueDepth camera that's causing the most trouble is the dot projector.
These manufacturing difficulties led investment analyst Jeff Pu, who was quoted in the Nikkei article, to revise down his iPhone X shipment estimates from 40 million units to just 36 million units for 2017.
Near- and longer-term impact to Apple
The near-term impact to Apple will probably manifest itself in the form of lower peak-quarter iPhone sales (peak iPhone shipments tend to occur during the first quarter of a particular fiscal year) and ultimately revenue. What can serve to mitigate that bad news is that the bulk of the iPhone X sales won't be lost during the fiscal year, but instead pushed out until later in the fiscal year. A pushout is fine, since full-year performance is arguably more important to evaluating the performance of a business than the performance of any single quarter.
From a longer-term perspective, there are some things to consider.
A slight negative would be frustrated would-be iPhone X buyers going instead for cheaper iPhone 8 and iPhone 8 Plus smartphones. Since they are less expensive, a sale of one of those in place of an iPhone X would negatively impact average selling prices and, therefore, total iPhone revenue. As long as those individuals are buying iPhones, though, it's not the end of the world.
Another thing to consider is that since the iPhone X is so difficult to manufacture due to being a truly cutting-edge smartphone, it may remain fresh longer. That could mean stronger-than-usual sales toward the end of the cycle since the iPhone X should be an unequivocal leadership product throughout its time as Apple's best phone -- something that arguably hasn't been the case for previous iPhones.
In an ideal world, Apple would've had mass quantities of the iPhone X available on Sept. 22 alongside the iPhone 8 and iPhone 8 Plus, but the current situation is hardly bad. Today, Apple has great phones available in the form of the iPhone 8 and iPhone 8 Plus, and it'll have an even better phone available beginning in November when the iPhone X launches.
Despite potential supply issues with the iPhone X, Apple's product lineup is strong and it's only going to get stronger in the coming months.
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Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.
