Qualcomm’s admission of a production shortfall in their 28-nanometer chips has led analysts and tech pundits to assume that the iPhone 5′s release date will be delayed because of it. Read how Qualcomm’s supply issues may have been caused by iPhone 5 production in the first place.
Last week, thanks to the analysts at Piper Jaffray, the iPhone 5 rumor mill swung wildly back to being resigned to an October release date. Their analysis came after a report from Reuters indicating that Qualcomm’s series of 28-nanometer S4 Snapdragon chip inventories have been constrained since December, and as a result, they will not be able to meet production demands for their clients in upcoming months. The report concluded that because the iPhone 5 will “support LTE and utilize the Qualcomm 28nm baseband modem,” Piper Jaffray expects the iPhone 5 release to be delayed.
It didn’t take long for tech pundits to broadcast Piper Jaffray’s conclusions about the Qualcomm chip shortage being bad news for the June iPhone 5 release date rumor. CNET weighed in early, with Lynn La parroting the Piper Jaffray report: “According to an industry note from investment banking firm Piper Jaffray, Apple will most likely continue its trend of October launches and wait until this fall to release the iPhone 5. This later release date is said to be due to a supply issue with Qualcomm’s 28-nanometer modem chip, which will enable the new iPhone to be LTE-compatible.”
Chris Burns at SlashGear sees the Qualcomm admission as a kind of tip-off to the October iPhone 5 release, saying, “At this stage it appears that if this indicator tied with Piper Jaffray’s analyst Gene Munster’s predictions can be collectively strewn into a date – we’re looking at October of this year for the next generation iPhone.
On top of this, according to new reports, Qualcomm is scrambling to ramp up production of their 28-nanometer chips, which is being interpreted as further proof of a later iPhone 5 release, as the chip manufacturer moves to meet demands for summer iPhone 5 production. According to EDN, “Fabless chip vendor Qualcomm Inc acknowledged Wednesday that it was turning to other foundry suppliers amid a shortage of 28-nm capacity at its longtime foundry partner, Taiwan Semiconductor Manufacturing Co Ltd.”
Amidst all of this banter about Qualcomm’s shortage and how the iPhone 5 will suffer an October release because of it, few have considered the other possibility: is Qualcomm’s 28-nanometer chip shortage a result of iPhone 5 production, thus pointing to a June release after all?
To support this idea, let’s go back to the original Reuters article, since it doesn’t assume or reference anything about the iPhone 5. The article quotes Qualcomm Chief Financial Officer Bill Keitel as saying, ”Demand went so far ahead of availability that we’ve decided to start spending more money to get more supply as soon as possible.” Keitel’s comments confirm that the shortfall of chips was not a result of some kind of manufacturing snafu, but rather from excessive demand that Qualcomm’s supply could not keep up with. Since we know that Qualcomm is suffering from supply constraints across all of its S4 Snapdragon 28-nanometer chips, this implies that someone has been buying up their chips over the past months.
Couldn’t that have been Apple?
Tiernan Ray at Barron’s seems to br thinking along these lines. Reporting on CitiGroup’s Glen Yeung, who issued a “buy” rating after the Qualcomm news, he explains that “While the company attributed the shortfall to supply constraints for newer chips with 28-nanometer feature sizes, Yeung thinks it was all about Apple. Specifically, Apple’s forthcoming transition to the as-yet-unannounced “iPhone 5,” he speculates, means the company has less need for Qualcomm’s existing 45-nanometer chips this quarter.”
Yeung is assuming an October iPhone 5 release as well, but why is it not possible that Qualcomm’s current dearth of 28-nanometer chips is a result of Apple’s big iPhone 5 order for them, and that it will be the iPhone 5 competitors who will be delayed? After all, we’ve already heard about the Foxconn hiring rumors, and since assembly is the last process in manufacturing, Apple may have its Qualcomm chip components already in place.
It’s worth noting that Qualcomm themselves never attributed any specific client or device to the heavy demand that led to this shortfall.
What’s interesting, however, is that, when you look at the list of S4 Snapdragon chips, very few appear to be deployed in current devices. According to Wikipedia, only the MSM8960 and MSM8260A have been used on a smattering of Asus, HTC, and ZTE devices this year — certainly not enough to put Qualcomm in the production hole that they now find themselves in.
This story can be likened to the recent LiquidMetal rumors as well: we reported last week on how LiquidMetal Technologies released this statement to the press on the morning of March 7th, when the iPad 3 was announced:
Liquidmetal Technologies today announced that its manufacturing operations are currently in the midst of shipping commercial parts to several of its customers world-wide. Parts delivery began this past December with continuing shipments scheduled for the months ahead.
Tech media analysts blundered this report badly, excitedly assuming that it was making reference to the New iPad being constructed of LiquidMetal’s alloy. Now, in 20/20 hindsight, that admission may have been pointing to the iPhone 5, instead — or on other products entirely. “Several of its customers” certainly doesn’t indicate Apple directly.
By no means does Qualcomm’s chip shortage clearly indicate a June iPhone 5 release. But if also doesn’t point to a delayed October release, either. All we know is that the shortfall was driven by huge demand, and none of the 2012 devices using the 28-nanometer chips are selling well enough to substantiate the shortage. Thus, I believe there is just as much reason to believe Apple drained Qualcomm’s warehouses for a June iPhone 5 as there is evidence to support the October release.
By Michael Nace