Nikkei Asian Review, which has a good track record of reporting Apple (NASDAQ:AAPL) supply chain related news, says Apple is planning to ship just 20 million iPhone X units this year -- just half of what Apple had originally hoped to ship.
The shortfall is apparently due to "struggles to solve technical issues with components supporting the model's new face authentication feature."
The 20 million figure jibes with the iPhone X shipment estimate of 25 million to 30 million units that respected KGI Securities analyst Ming-Chi Kuo recently published.
What does this mean for Apple's business? Let's dive in.
20 million now, even more later
The bad news is that this production shortfall -- if true -- will mean Apple won't generate as much revenue as it potentially could have this quarter. Since the average price of an iPhone X is $1,074, shipping 20 million fewer units during the quarter would mean a potential revenue shortfall of about $21.5 billion.
That's not chump change.
Of course, even if Apple is so heavily supply constrained that it ships 20 million fewer iPhone X units during the quarter than it wanted to, not all is lost. Indeed, Apple's current quarter should still include substantial shipments of older generation iPhones as well as the newly released iPhone 8 and iPhone 8 Plus.
Even though the iPhone 8 and iPhone 8 Plus aren't as exciting as the iPhone X, I suspect Apple will still sell millions of them, which should help soften the blow from a potential iPhone X shipment shortfall.
On top of that, if demand is so high for the iPhone X relative to supply that Apple can't reach supply-demand balance this year, there are still three more quarters in the current fiscal year for Apple to get iPhone X devices into people's hands.
Though some would-be iPhone X buyers might give up and either go with one of the more readily available iPhones or even a smartphone from another vendor, I suspect that most of the iPhone X demand that isn't satisfied in this calendar year will be met early next year.
This would have the effect of simply shifting iPhone revenue from one quarter to the next -- not exactly something that'll cause Apple's business -- or its stock price -- to collapse.
Apple deserves praise
Although it's clear that many prospective iPhone X buyers won't get ahold of devices until next year, I think Apple deserves praise for delivering a bold, cutting-edge product with the iPhone X, even if it meant taking bigger-than-usual risks in terms of component supply.
The iPhone X is not an easy device to build, but it is a thoroughly cutting-edge product that appears worthy of the hype that it's getting, as well as its high price tag.
Apple can't introduce paradigm-shifting iPhones each year, but I do hope to see Apple continue to take bigger technological risks with each new generation of iPhone.
This could mean supply shortfalls during the first full quarter of availability, but it's better to build a product that people really want, even if it means they have to wait an additional few months to get it than to solely offer low-risk products that people aren't as excited about.