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Here's Why Apple Inc. May Be in Panic Mode

By Ashraf Eassa - Jul 17, 2017 at 9:30AM

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It's reportedly down to the wire for critical features slated to arrive in Apple's upcoming iPhone models.

Website Fast Company, citing a "source with knowledge of the situation," reports that "June was a tense month for the engineers and designers on Apple's (AAPL 2.14%) iPhone team."

Fast Company's source says the tension was due to "software problems" plaguing the upcoming premium OLED iPhone, commonly referred to as the iPhone 8.

Three Apple iPhones displaying different parts of Apple's app store.

Image source: Apple.

"If the software problems aren't resolved quickly," the report says, "the new flagship iPhone could even launch with major features disabled."

Two features hang in the balance

Two of the major new features slated for introduction in the new iPhone are apparently affected by these reported "software problems." Fast Company says the wireless charging implementation and 3D sensing capability of the device are victims of these issues.

The report made sure to emphasize that the issue with these technologies wasn't the hardware that'll be included in the phones to enable these features, but the software that controls that hardware.

Apple's two options

Apple appears to have two options here. The first would be to simply get the software required to drive these features in shippable shape. That'd be the ideal course of action, especially as it would be awkward for potential customers to buy the new iPhone models but not be able to use two important features -- though 3D sensing is arguably much more important for Apple to get right as quickly as possible than wireless charging is.

Disabling "major features" would cause some customer frustration and might potentially cause customers to defer purchases until the features are enabled, but if they are enabled shortly after the phones make it out to customers, such a course of action probably wouldn't sink this product cycle.

Furthermore, if the reports that Apple's upcoming premium iPhone will be heavily supply-constrained until sometime in the first half of 2018, then having some customers potentially put off orders until the software issues are fixed may not ultimately affect Apple's revenue performance.

One more thing

In addition to the software problems, Fast Company says the use of organic light-emitting diode (OLED) displays in the new phone "has been a worry for Apple, and a potential cause of delays."

The report explains that those worries don't stem from "the quality of the hardware," but instead "because of a scarcity of OLED manufacturing facilities around the world."

Fast Company notes that Apple "is reportedly getting the bulk of the screens from rival Samsung (NASDAQOTH: SSNLF)," though other reports suggest that all the OLED displays on this year's premium iPhone model will come from the South Korean electronics giant.

It's worth noting that Apple has probably been working on this phone for quite a while. One ex-Apple employee on social media says this phone has been in planning since the spring of 2014. So Apple has had plenty of time to inform potential suppliers of its display needs. While Apple may be right to worry, I suspect that this "fear" comes from a place of healthy paranoia rather than poor planning on Apple's or Samsung's part.

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.

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