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This Must Be Why Apple, Inc. Staggered the iPad Pro Launches

By Evan Niu, CFA – Mar 23, 2016 at 9:00AM

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Did low A9X yields force Apple to delay the 9.7-inch iPad Pro?

iPad Pro is now a family. Image source: Apple.

For a little while there, it was a bit confusing.

After Apple (AAPL -1.79%) chose not to update the 9.7-inch iPad Air 2 last fall, the product cycle was up in the air and it was unclear what the Mac maker was up to. Were product cycles about to get longer and approach 18 months? Now we know. Maybe.

The latest and greatest
Last month, Bloomberg did an excellent profile of Apple's new Senior Vice President of Hardware Technologies Johny Srouji that's well worth reading.

The report starts by describing how the iPad Pro was behind schedule, which makes sense since investors first caught wind of the device way back in 2013. But those rumors failed to materialize until just a few months ago. The iPad Pro's delayed timeline actually accelerated Srouji's timeline for the A9X chip that would go on to power the device.

A9X inside. Image source: Apple.

The iPad Pro was initially supposed to carry an A8X, but it missed the cutoff and it wouldn't inspire a lot of confidence to launch an A8X-powered iPad Pro alongside an A9-powered iPhone 6s, since it would immediately be perceived as a previous-generation device. You really need the latest and greatest for a newer (and more expensive) form factor.

Srouji pulled it off, and earned a major promotion to join the executive team in December, alongside a hefty RSU grant worth $9.6 million at the time.

Pick your favorite child
The episode may also help explain the staggered product cycles that we've seen for the iPad in recent months. Keep in mind that even after unveiling the 12.9-inch Pro in early September, Apple wouldn't actually ship the enormous tablet until mid-November. Something was holding up production.

Were low A9X yields to blame? Image source: Apple.

There were some reports that low display yields were the culprit, and Apple Pencil was independently supply constrained, but it's also highly likely that yields for the A9X were extremely low as Apple ramped up production at partner Taiwan Semiconductor Manufacturing (TSM -2.99%). The Motley Fool was actually among the first sites to obtain a die shot from teardown specialist Chipworks, and the A9X is huge, despite the fact that it's manufactured on TSMC's 16-nanometer FinFET process. But since TSMC's FinFET process is still in its first generation, yields should be expectedly low. In addition, the sheer size of the chip adds complexities and costs.

If yields were low and Apple knew that A9X supplies would be limited until yields matured, it makes sense that the company would choose to focus its efforts on the higher-end flagship iPad Pro, since it would be pushing into a newer market segment altogether with a 12.9-inch display.

All caught up
There should be little doubt that Apple would have preferred to launch the new 9.7-inch iPad Pro last fall simultaneously, since it's a popular display size and Apple could have then captured significant demand during the busy holiday shopping season as opposed to the seasonally soft March quarter. This is just how it played out.

Now that Apple's over the hurdle, what happens next?

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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