Qualcomm Chip Shortage May Suggest June iPhone 5 Release, Not October
Posted by Michael Nace on Sunday Apr 22, 2012 Under iPhone 5 Opinion
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
Michael Nace is the Publisher of the iPhone 5 News Blog and iPhone 6 News Blog. He has published articles about the iPhone since 2010.
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April 22nd, 2012 at 11:48 am
Great article! When others took the article and assumed the worst, you looked deeper into the issue and came to a conclusion that could very well be correct! Well done!
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April 22nd, 2012 at 11:59 am
A much more logistical way of looking at it. I haven’t been commenting on most of the articles because of being in Miami for a speech and debate tournament. But the peices seem to fall right in place for a summer iPhone release.
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April 22nd, 2012 at 12:26 pm
I just had a beautiful dream last night the iPhone 5 was released in June lol I hope so!
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April 22nd, 2012 at 12:38 pm
Thanks, guys. If you like this article, please share it via your social networks. It really helps the blog!
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April 22nd, 2012 at 1:21 pm
Michael, you hit it out of the ball park again, great analysis!
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April 22nd, 2012 at 1:24 pm
Great article and perspective on the shortage.
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April 22nd, 2012 at 2:03 pm
Great article Michael! I will share it today! It is amazing how many tech writers are just lemmings, never thinking for themselves. I’m so glad I’ve found your blog. One additional reason that causes me to be absolutely confident of a June release (I think you have touched on this as well), the iPad mini is coming, no question (and may be the source of some of this October iPhone 5 talk), and it is coming in October. Then in November in time for the holidays the iPanel tv will be here. There is no way on God’s green earth Apple is throwing an iPhone release into that window. It just is not going to happen. June it is!
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April 22nd, 2012 at 7:22 pm
Thank God someone else besides me sees that Apple is trying to cause a diversion because we are getting close to finding out when they are releasing the iphone5. Because out of know where there a shortage in chips?
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April 22nd, 2012 at 8:07 pm
To me, the fact that 1) Qualcomm’s supply shortages for the 28nm Snapdragon S4 line of chips was caused by “demand,” and 2) there are very few devices currently using the 28nm chips, tells me that someone bought up the chips. Now, it may not have been all Apple — Samsung could have snatched them up for the SG3 as well — but I think it stands to reason that Apple isn’t going to be left whittling their thumbs waiting for Qualcomm to pony up some chips.
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April 22nd, 2012 at 9:53 pm
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April 23rd, 2012 at 10:45 am
@Michael,
Are you related to Mrs. in Everett? She gets analogies and common sayings incorrect, much to the amusement of us both.
“that Apple isn’t going to be left whittling their thumbs waiting for Qualcomm” OUCH!
Whittling is what you do with sticks or wood and a pocket knife, essentially shaving the stick/wood.
I think you meant, “that Apple isn’t going to be left twiddling their thumbs waiting for Qualcomm” where twiddling is moving them over each other in a way that indicates boredom while waiting.
That being said, excellent article on the supply chain and how this may be a diversionary tactic on the rumor mongers. I like your way of doing things, using data to drive towards a conclusion; not having a conclusion, and having the data support it.
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April 23rd, 2012 at 11:04 am
LOL! No, Jeff. That was most likely a coffee-had-not-yet-taken-effect typo.
I’m glad you liked the article. I think we’re seeing a lot of market manipulation with these recent rumors: LiquidMetal and Qualcomm are benefitting from these rumors, stock wise. It might also be part of an effect to halt a momentary slide in Apple shares.
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April 23rd, 2012 at 1:04 pm
I still believe that the iphone5 will come out in the summer because if you look into it qualcomm doesn’t say why they are low on supplies. I think the reason they are low is because apple bought all the chips and leaving other manufacturers high and dry. I honestly don’t think that consumers would get mad if the phone comes out in the summer because look at the sales for the 4s and it isn’t much of a difference between the 4 and 4s and the sales are still good. I personally think a summer release would be best for sales. Also, think about when they put up that article about hiring 18,000 people now if it was coming out in October I don’t think they would’ve went on a hiring spree and getting the production plants ready because assembling the phones one of the last steps of production. So i’m still rooting for a summer release
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April 23rd, 2012 at 1:34 pm
Plus, it’s not like those 18,000 people will be:
Ready to make them on day 1
Will make the the phones for the first day of availability.
Also, all of the iphone 5′s won’t be sold on the first day, so if they sell 43 Trillion of them over the life cycle, all 43 Trillion won’t need to be ready on the first day.
Plus, it’s weird how a shortage, or a perceived shortage drives up demand to a point, then, if there is a perceived (or real) extended wait on them, that will make the demand go down.
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April 23rd, 2012 at 1:47 pm
Hey Michael,
Qualcomm is definitely NOT benefitting from these rumors stock wise. Their shares sold off almost $5 bucks after the earnings call last week discussing the chip shortage. It has been down every day since, although the market has been trending down as well. Not having enough supply to meet demand is a high quality problem, but Qualcomm is being punished heavily for it.
Hope you are right, and the shortage is the result of Apple buying up all the supply. The buildup to June should be fun. I enjoy reading all the articles.
Thanks for all your hard work.
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April 23rd, 2012 at 1:52 pm
True, Eric, but I’ve also read that analysts are switching their outlook on Qualcomm to “buy,” since the long-term trajectory for them is going to be big. Actually, if I had some extra money, I’d probably plunk some down on Qualcomm.
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April 23rd, 2012 at 3:09 pm
Honestly I think it makes more since for Apple to release the iPhone 5 in June because it has a high demand. So many people want and have been waiting for the iPhone 5 for a long time and held out on getting the 4s because they knew that the 5 would be coming out in 2012.and also the fact that Apple has many competitors when it comes to the iPhone 5 for example the Samsung galaxy s3, and the Google phone that is trying to use the same chips that Apple is using in the iphone5. they know that if they don’t get that chip in there phones there won’t be any competition when It comes to the new iphone. There are so many factors that contribute to a June relase. And unless Apple say it there self that there’s a shortage in chips and the dealer least back October I don’t believe what Qualcomm says. They could just be saying that for publicity . Just my opinion but either way I will be getting it whenever it does come out.
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