A flood of new iPhone component orders, as well as a new analyst’s report detailing a 25% drop in iPhone 4S production, indicates that the iPhone 5 production process is well underway. But how do these production rumors wash with the “two prototypes” rumor?
We’ve been noting recently that there has been a great deal of contradiction between iPhone 5 rumors that have been hard to reconcile. A couple of new reports today have further complicated the prognostication process, with new whisperings out of Asia that Apple — and its assembly partner Foxconn — are beginning to buy up the parts they need to assemble what is ostensibly the iPhone 5.
According to SlashGear, the iPhone 5 “. . . is set to have components that are not necessarily working with the same companies Apple has been working with before. . .”If this is the case, then, in my opinion, it remains to be seen when iPhone 5 component production really began, since new component supplies may mean that analysts have not been looking in the right places for clues. Regardless, specific information on components appears to be bubbling to the surface, “. . . with the most recent supply shock being Apple’s leaked purchase of flash memory products with Elpida, a competitor with the then $10 million USD poorer Samsung, for over half of their total parts in-house.”
SlashGear has also put their finger on this rumor: “Apple has also continued to push for parts across China and with the group known as TXC. Reports today show that TXC has secured component supply orders for use with the next iPhone release. TXC is a quartz crystal device maker in China.”
But the most interesting production rumor that SlashGear and others are reporting has to do with what Foxconn is up to.
Apparently, Foxconn is in the process of buying up components: “. . .they have had an order put in with the Osaka, Japan plant for Sharp displays. This order has Foxconn in a deal to purchase up to and including 50 percent of the large-sized LCD panels and LCD modules made by Sharp at this particular plant, this leading analysts to believe that word of Sharp being one of three possible iPhone 5 panel suppliers could very well be true.”
Given the fact that Foxconn makes iPhones, not the parts that go into the iPhone, the fact that they are in the process of mass-purchasing Sharp displays — together with a new plant that they are building in partnership with Apple — points to the fact that production for the iPhone 5 is to begin in earnest (and on a big scale). I recall the report from April that indicated Foxconn was adding 20,000 new workers — it looks like they are set to get to work on “something big.”
iPhone 4S On The Wane
The SlashGear article about rumored iPhone 5 production pairs nicely with an article today on Apple Insider that outlines a sharp decline in iPhone 4S production and orders. Citing a new analyst report, they had this to say:
“Analyst Shaw Wu with Sterne Agee said in a note to investors on Tuesday that he has found in his checks with suppliers that Apple has reduced iPhone orders by between 20 and 25 percent from the 35.1 million units the company shipped in the March quarter. If those numbers hold for the current June quarter, that would result in shipments of between 26 million and 28 million iPhones. That result would be below Wall Street consensus of between 30 million and 31 million.”
According to Wu, the reason for this reduction in production “. . . is not demand related but rather due to the upcoming 6th generation iPhone refresh likely in the September-October timeframe. It appears AAPL is opting to be conservative with its suppliers to factor in a potential 2-quarter pause ahead of the refresh and also to manage inventory.” The oddness in this analysis is that, last year, Apple didn’t begin to draw down its iPhone 4 inventories until the September quarter, just ahead of the iPhone 4S announcement in October. If the prevailing thought that the iPhone 5 is going to be released in October of this year, then Apple is drawing down inventories awfully early — some 4 months early.
Apple Insider reports: “Wu noted that Wall Street consensus last year ‘grossly underestimated the impact of a pause and inventory drawdown ahead of the iPhone 4S.’ He believes investor expectations should be drawn in for the June quarter as well as the following September quarter.” That’s true, but it would not explain why Apple would be adjusting production and inventories some four months ahead of the iPhone 5′s alleged release.
In my opinion, the current production evidence, as well as this production decline for the 4S, still might suggest a summer iPhone 5 release, since Apple was not engaging in any of this activity last year at this time, and I still do not think that Apple would need four months’ lead time on production in order to launch the new iPhone.
By Michael Nace