Supply for Apple's (AAPL 1.23%) next lineup of iPhones and iPads is already under way. Taiwan Semiconductor has shipped its first batch of Touch ID fingerprint sensors to be used in next generation iPhones and iPads, cecb2b.com reports (via MacRumors). While it's good to hear Apple will be bringing the fingerprint sensor to the latest iPad Air and iPad mini in addition to its iPhones, the best takeaway for investors is that Apple seems to be making better progress in an area that seemed to be a major bottleneck last year.
Touch ID. Image source: Apple.
Last year's woe, this year's strength?
Production, not demand, is always the worst enemy of Apple product launches. Last year was no exception. Production plans for Apple's iPhone 5s were allegedly halved in the third calendar quarter of 2013, with the root of the cause being low-yield rates on Apple's Touch ID sensors. Sure enough, the 5s sold out in the first two days of availability after last year's September launch. The supply constrained product line forced Apple to push online delivery estimates to October.
Even with supply limitations in 2013, however, Apple was able to sell a record 9 million iPhones during the opening weekend (of course the iPhone 5c was included in these numbers). The 9 million sold easily trumped the 5 million that Apple was able to supply during the first weekend of availability. Imagine the blowout figure if supply wasn't limited.
Fortunately, the early start on Touch ID production this year suggests the technology will not likely be a bottleneck for this year's new lineup of iProducts. Does this mean there won't be any bottlenecks? Not at all. In fact, there's already talk about Apple delaying its rumored 5.5-inch iPhone 6 for a launch several months after it debuts a 4.5-inch version of the iPhone 6 due to high costs of the sapphire crystal that Apple is rumored to use in its displays. Still, it's good news for investors that Apple appears to be making progress on a technology that was a bottleneck last year.
MacRumors renderings, by Ferry Passchier, of the alleged 4.7-inch and 5.7-inch sixth generation iPhone lineup. Photo used with permission.
Synergies and cost curves
Cecb2b.com's report that Apple will be bringing Touch ID to the iPhone 6, iPad Air 2, and iPad Mini 3 isn't a surprise. Bringing the technology to products beyond the iPhone, and implementing it in all future mobile devices, will not only add value to the company's ecosystem of products by making them more secure, but it will also make Touch ID more useful to app developers, because it will be used more broadly across Apple devices.
Then, of course, there are the obvious economic benefits. Scaling the technology across more devices will help Apple work further down the cost curve of the new technology -- something Apple has proven it can do very well, time and time again. Looking back at Apple's historical iPad and iPhone launches, investors shouldn't be worried about the company not being able to further ramp-up production for this year's iPhone and iPad launch weekends. In literally every subsequent iPhone and iPad launch, Apple has historically been able to put up significantly higher numbers than the year before.
