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Foxconn Begins Shipping iPhone X But First Batches "Are Smaller Than Expected": DigiTimes

October 21, 2017 - 1:38am

While Apple's troubles with the iPhone 8 (which is being outsold by the iPhone 7) have been duly discussed in recent days and largely ignored by Wall Street, whose hopes remain pinned on the iPhone X, the latest update from DigiTimes is even more concering, as it suggests that general demand for the entire Apple product suite may be lower than expected. According to Digitimes, iPhone assembler Foxconn has reportedly started shipping iPhone X units, however the first batches smaller than expected. Foxconn has shipped off the first batch of 46,500 units from Zhengzhou and Shanghai, heading for the Netherlands and United Arab Emirates respectively, DigiTimes cited Xinhuanet.

Apple will start to take pre-sales order on the iPhone X on October 27 and has said it would start delivering the devices on November 3. However, the low number of the first batch would suggest that the new X-mobel might be one of the more “hard-to-get” smartphones on the market these days.

Foxconn has now ramped up its output of the new iPhone flagship from 100’000 units on a weekly basis to 400’000, the report continues, although it is unclear if this increase will be enough to meet market demand.
Separately, TechCrunch confirms that for whatever reason Apple is not producing enough iPhone X units for first weekend sales, citing a new report from KGI Securities analyst Ming-Chi Kuo, according to which "Apple is still facing supply chain constraints for the upcoming iPhone X. The company will have around 2 to 3 million units before the launch on November 3rd, which shouldn’t be enough to meet demand."
While Apple didn’t disclose exact numbers for first weekend sales last year, the company sold 13 million iPhone 6s units during the first weekend, 10 million iPhone 6 units and 9 million iPhone 5s/5c units. The iPhone 8 is already available, which could mitigate demand for the iPhone X, but it sounds like many buyers will be disappointed by Apple’s initial stock.
The suggested reason is that Apple's supplier-chain is simply unable to keep up:

According to KGI Securities, Apple now uses a flexible printed circuit board for the antenna. This is not your average circuit board, so Apple has had issues finding suppliers that can produce those components at scale. Murata was supposed to be the main supplier for this part, but it sounds like the company can’t meet Apple’s strong requirements. Since then, Apple has found a new supplier, which created some delays.
 
On the camera front, Apple is using a different circuit board for each sensor. Other phone makers only use one circuit board. This custom design has also been a challenge.

iPhone X pre-orders start on Friday, October 27th at midnight Pacific time, and while production should ramp up in the coming weeks, TechCrunch notes that "it sounds like it could take months before you can just walk in an Apple store and buy a new iPhone X." It concludes that "It’s going to be interesting to hear Tim Cook’s comments on those supply chain issues when Apple announces its quarterly earnings in a couple of weeks."
The questions Cook will face are three: i) why did Apple ignore the problems in its supply chain until it was so late, ii) what will the delayed deliveries mean for Apple's Q4 and subsequent bottom line, and iii) a question we doubt will be asked but everyone will be thinking, is whether these supply bottlenecks were on purpose, designed to create an artificial product shortage while boosting the latest phone's "hype and coolness" factor.