Why Apple, Inc.'s iPhone 6 Could Be Scarce at Launch

iPhone 6 mockups. Source: 9to5Mac.

Supply chain bottlenecks and inventory shortages are fairly normal occurrences for Apple (NASDAQ: AAPL  ) . That storyline is nothing new for the Mac maker as it continues to pursue innovative new manufacturing processes or industrial designs in the quest for ever thinner and lighter devices.

Suppliers are "scrambling"
On Friday, Reuters reported that Apple's iPhone 6 could be running into some component shortages related to the display. Sources say that Apple was hoping to move from two layers of backlight film to one, which would allow for a thinner design.

But using one layer wasn't bright enough, so Apple reportedly had to go with the standard two-layer design. That change has cost the company valuable time throughout the summer, and suppliers are now "scrambling" to produce enough units ahead of the expected September launch. The downstream effects aren't certain though, and the issue may or may not affect Apple's launch timeline or how many it can produce ahead of launch.

Even if the iPhone 6 is scarce at launch, consumers are used to possibly having to wait around to get their hands on the latest iPhones.

A trip down memory lane
This situation is extremely common for Apple. It seems like every year, some crucial ingredient faces low yields or otherwise limits Apple's ability to produce enough to meet demand.

In 2012, it was the iPhone 5's in-cell touch display. That same year, Apple began using friction-stir welding, normally used in industrial aerospace applications, to make thinner iMacs. That led to significant iMac shortages, as Apple had introduced the new desktop months before it could begin shipping. That was the only quarter since 2005 that Mac unit shipments underperformed the broader PC market.

Last year, Touch ID sensor yields were reportedly low, which held back iPhone 5s sales. That's also one reason why Touch ID was not included in any 2013 iPad models. As yields have improved, the fingerprint technology is now expected in Apple's tablets this year. On top of that, Apple misjudged product mix demand, expecting more demand for the iPhone 5c. The company had to reallocate capacity to the iPhone 5s once it realized this, which also took some time.

The iPad Mini with Retina display was also expected to see some shortages last year, in part because Apple was trying to avoid buying panels from Samsung. At the last minute, Apple decided to bite the bullet and use Retina panels from its South Korean frenemy in order to improve supply.

All's not lost
Previous reports have suggested that Apple is preparing for an utterly massive iPhone 6 launch, ordering 70 million to 80 million units from its suppliers. Hopefully, this reported backlight issue doesn't threaten the magnitude of the launch.

The good news is that investors aren't fazed by the possibility of iPhone 6 supply constraints, with shares continuing to march higher. Investors have seen this same thing play out time and time again, and the important thing is that Apple customers are so loyal that delayed sales related to constraints aren't lost sales.


Read/Post Comments (4) | Recommend This Article (6)

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 August 25, 2014, at 4:01 AM, Draugminaion wrote:

    iPhones are always scarce at launch, so that's not really news. If there weren't any production problems that would mean the next iPhone would be all boring old tech that anybody could do. Good to hear Apple is still pushing the leading edge..

  • Report this Comment On August 25, 2014, at 8:54 AM, Wingsy wrote:

    "It seems like every year, some crucial ingredient faces low yields or otherwise limits Apple's ability to produce enough to meet demand."

    Allow me to help you with that. Your wording is all wrong.

    "It seems like every year, pendants claim that some crucial ingredient faces low yields or otherwise limits Apple's ability to produce enough to meet demand, but that seldom turns out to be the truth. It's all made up to generate hits because ... because Apple."

  • Report this Comment On August 25, 2014, at 8:55 AM, Wingsy wrote:

    I could use a "u". Anyone got one to spare? :)

  • Report this Comment On August 25, 2014, at 9:01 AM, Mathman6577 wrote:

    There's been a lot of chatter online (mainly from people who don't know anything about Apple and the iPhone) about how the iPhone6 is "delayed". How can a device be delayed when Apple hasn't even provided a release date? Why don't we just wait until Sept. 9 when the company does that?

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3080352, ~/Articles/ArticleHandler.aspx, 12/18/2014 1:33:17 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement