Investors are now just a couple of months away from Apple's (AAPL 0.01%) presumed "iPhone 5S" September launch, which means that the chorus of rumors has reached a deafening crescendo. There are two somewhat conflicting rumors right now as to what the iPhone 5S launch will look like.
A tale of two Taiwanese publications
DIGITIMES is saying that the iPhone 5S may see some early supply constraints due to low yields for the fingerprint-recognition chips and LCD components. Low yields have supposedly pushed back commercial production of those key ingredients into later this month, whereas they should have begun in late June to early July to meet Apple's September schedule. Taiwan Semiconductor is producing the fingerprint-recognition chips.
The Taiwanese publication's anonymous tipsters say that 3 million units will have to be delayed into the fourth quarter, which isn't necessarily too long since that would just mean pushing back a month into October. Total iPhone shipments, including all models, are estimated at 30 million units. That last figure may seem low compared to the nearly 50 million iPhones sold last holiday quarter, but remember that it's just one questionable data point that doesn't give much insight into Apple's global supply chain or address things like starting inventory positions or third-party channel inventory.
On a separate note, Bloomberg is relaying a report from a different Taiwanese publication, the Commercial Times, saying that Apple may delay the introduction of the iPhone 5S altogether and the device might not be released until closer to the end of the year. A mid-range model is still on track for a third-quarter launch, according to the report. Most importantly, the Commercial Times alleges that the reason that the iPhone 5S is being pushed back is a last-minute decision to increase the display size to 4.3 inches.
One of these is not like the other
DIGITIMES may not exactly have the best track record with speculative rumblings, but its report is more likely to be accurate. There have been other reports that the iPhone 5S is ramping up production later this month, such as a research note from Jefferies analyst Peter Misek.
Apple has faced component shortages before and still launched new iPhones, albeit with some supply constraints. Last year's iPhone 5 was plagued with early constraints related to low yields on the in-cell touch displays as well as high quality standards for the aluminum chassis. Tim Cook acknowledged these constraints on the conference call, so it's entirely feasible for Apple to launch a new model even if supply isn't ideal. It's better than delaying the launch altogether.
It's extremely unlikely that Apple will move to a 4.3-inch display this year, since it just moved to a 4-inch display last year. Apple has been known to make last-minute component changes (like when Steve Jobs abruptly switched the original iPhone's display from plastic to Corning Gorilla Glass just six weeks before launch), but changing display size would effectively require redesigning the entire device. There would also be negative consequences to iOS, since introducing another screen dimension so soon would add a layer of fragmentation.
Apple may very well have a larger iPhone in the pipeline, but there's ample evidence that it can wait to get it right before addressing that niche market segment. The trend toward larger devices isn't urgent enough to risk delaying Apple's most important product launch of the entire year.
I never thought I'd say it, but DIGITIMES is probably right on this one.
