About Those Alleged iPhone 5 Production Problems

August 23rd, 2012

So let’s see now. The rumor sites have it that Apple will move to in-cell display technology for the iPhone 5. This scheme combines the touchscreen with the LCD, which should make for more efficient production, and thinner components. According to published reports, Apple recently received a patent  for technology “integrating the layered structure of an LCD and touch sensor,” which seems to be essentially the same thing. This development only makes the story seem more credible.

Now let’s assume that the next iPhone will incorporate in-cell technology. I mean, nothing is certain until Apple makes the official announcement, which is expected during the expected September 12 media event. Even then, there has been enough supposed informed speculation to almost, but not completely, confirm the basic details of the specs of the iPhone 5.

There is yet another wrinkle about the iPhone 5’s expected features, a report, citing “sources,” which claims that early production yields of the in-cell displays are lower than expected. The production figure is said to be 15 million for the September quarter. While I realize that Apple wants to have several weeks of production in hand before a product ships, even assuming that the iPhone 5 officially goes on sale the week after media event, there will surely be sufficient quantities to move several million copies the first weekend, and another few million the following week as the quarter ends.

However, the key question is this: Is there really a production problem? How would that information get into the media, since it is one of the super-secret details that Apple would strive to suppress. Sure, if production difficulties did impact earnings, that factor may be disclosed during an earnings conference call with financial analysts, but it wouldn’t happen until the latter part of October. It wouldn’t be disclosed so early in the game.

Besides, between now and the end of September, it is always possible that, if there are production issues, they would be resolved, and the ramp up would continue at full tilt?

Now consider this: Since this is a story attributed to unnamed sources, you have to wonder whether the media is depending on one or more people, if not directly connected with Apple, who might have axes to grind. Wouldn’t stories of production problems with the iPhone 5 impact Apple’s stock price, since investors may expect Apple’s earnings to be negatively impacted? I can see where Apple’s competitors would like to see Wall Street bet against Apple, or perhaps try to persuade customers that they should buy something shipping now rather than wait for a smartphone that may be backordered for months.

Of course, a product that is backordered may thus become even more attractive to potential customers. It means that there is a lot of demand, so might as well join the crowd. Don’t forget that the iPhone and the iPad have always been backordered when shipping began. It usually took weeks or months for production to catch up with demand. Even the MacBook Pro with Retina display was backordered by several weeks until very recently. No conspiracy theories needed.

Yes, it is perfectly true that pretty much everything we know about the next iPhone is steeped in rumors and speculation. We don’t know that Apple will really hold a media event on September 12, though certain tech pundits, such as The Loop’s Jim Dalrymple, have said so. That Jim is always right should be an indication that the claim has substance, not to mention the fact that the mainstream media has given the story the same level of authority.

That employees from wireless carriers that carry the iPhone have reportedly been advised to avoid vacations and expect overtime the last part of September also indicates that they will be busy filling orders for a new product, which is expected to be the iPhone 5. That phenomenon played out during previous iPhone introductions.

As for the rest: Well, there have been pictures of leaked prototypes that indicate a four-inch display, with a vertical but not horizontal increase in size. Similar leaks have included a slimmer dock connector, with 9 pins as opposed to 30 pins; even a cable prototype has been shown. If it’s unidirectional, it would mean that you wouldn’t have to hunt for the proper direction in which to insert your dock connector into your iOS gadget. I don’t know how many broken connectors have resulted, but convenience is convenience.

If Apple is building a larger case for the iPhone 5, you have to expect a redesign to some degree, rather than just taking the existing form factor and make it longer. LTE networking is a given, since that’s the requirement for a high-end smartphone. But I’ve already covered the rumors and expectations. I suppose Apple could pull a few surprises, and it’s even possible that rumors of in-cell technology for the product’s display are themselves incorrect. That Apple patents something doesn’t mean it will ever show up in a shipping product, although so-called leaked prototypes seem to confirm this particular feature.

As far as production problems are concerned, if serious, Apple may move out the actual shipping date. If slight, the expected shipping date won’t change, just the amount of product available for customers to buy. Even then, you may not know the truth unless backorders slip to a couple of months, in which case even higher than expected demand might also explain why.

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