Apple Starts to Ramp Up

It seems that Apple (NASDAQ: AAPL  ) investors were right to disregard reports last week that primary assembler Foxconn saw a troubling 19% drop in sales, presumably related to "weak demand" for the iPhone.

Both The Wall Street Journal and Bloomberg are reporting today that Foxconn has resumed hiring in its factories as it starts to ramp up iPhone production. The contract manufacturer had instituted a hiring freeze in February, which bears jumped all over. Initially, the freeze was similarly pegged to "weakening demand," but it could actually be considered evidence of improvements in Apple's labor supply chain that were causing workers to stick around longer.

Regardless, the freeze has been ended and Foxconn has put its "Help Wanted" sign back up. The reports specifically note that the hiring is in response to "Apple's request to boost capacity." Foxconn has added roughly 10,000 workers at its facility in Zhengzhou, which only produces iPhones according to Apple's supplier list.

A Foxconn spokesman merely told the WSJ that the move was to meet seasonal demand from clients, but an anonymous source confirmed to the publication that Foxconn is preparing to enter mass production of the next iPhone.

The what is mostly a known quantity at this point. Investors are expecting an iPhone 5S with a similar design, probably with an integrated fingerprint sensor leveraging last year's acquisition of AuthenTec. Affordable iPhones are also probably on the way, to target emerging and unsubsidized markets such as India, among others. The polycarbonate casing that Apple's expected to use may come in numerous colors.

The when is much less certain. KGI Securities analyst Ming-Chi Kuo, who boasts an impressively accurate track record with iRumors, believes that Apple's been running into some manufacturing challenges with both iPhones. The fingerprint sensor seems to be a technical challenge, and the ultrathin plastic casing is reportedly seeing low production yields. Kuo believes these issues may cause the iPhone launch to be later than what investors are expecting.

Still, the hiring reports may signal that Apple's ramping up iPhone production, since it often takes the company months to build up sufficient inventory for its simultaneous global rollouts. With two important flagship Androids launching this month, let's hope that's sooner rather than later.

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 15, 2013, at 10:30 PM, kthor wrote:

    bummer don't matter how many people they hire, if the stock keeps falling, then they have failed! lol

  • Report this Comment On April 16, 2013, at 1:14 AM, lakawak wrote:

    So it has nothing to do with actual sales...just that they are about to start manufacturing a brand new model.

    Next Tuesday's earnings report is going to be uglier than the last. And we all know what happened with the stock after that one. I am sure everyone at Apple (and the various investment analysts who have a lot of AAPL and keep trying to pump the price up so they can dump, was hoping that in the 2 1/2 months after that initial big sell off in January that the price would ahve rebounded a bit. But instead, it kept falling.

  • Report this Comment On April 16, 2013, at 2:03 AM, deasystems wrote:

    @lakawak: "Next Tuesday's earnings report is going to be uglier than the last."

    Considering that the last quarter was beautiful, that won't be a bad thing! You seem to be unaware that last quarter, Apple *beat* earnings estimates ($13.81 per share vs. $13.47) and met revenue estimates ($54.5 billion vs. $54.7 billion).

    Has someone pulled the wool over your eyes, lakawak?

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