Apple Inc. (NASDAQ:AAPL) has a lot riding on this September’s iPhone launches. Over the past year, the company has faced slowing –and in some quarters declining — sales of the iPhone, its primary source of revenue.
There have been numerous reports that the iPhone 8 is facing production challenges that could result in very limited launch quantities. But now the situation is looking a little grimmer for AAPL, with reports that the iPhone delay could extend to the iPhone 7s as well.
iPhone Delay Expected for New AAPL Flagship
AAPL’s iPhone 8 is shaping up to be the ultimate in flagship smartphones. At this point, leaks from Apple’s supply chain point to an all-glass smartphone, with an OLED display that covers virtually the entire front face, wireless charging and a revolutionary front camera that supports the company’s push into AR. Initially, speculation was that starting price tag could hit $1,000. The possibility of a $1,200 sticker is now being thrown around.
Pent up demand from upgraders who have been waiting for something that looks different from their iPhone 6, the expected rush of Apple fans who jump on any new iPhone and possible switchers were painting the picture of a whopper launch for AAPL. That is important for the company and its investors, because iPhone sales have been slowing this year, and even declining in some quarters. And iPhone sales are the primary driver of AAPL revenue.
But then claims of an iPhone delay began to grow. Those OLED panels can be in short supply, the advanced 3D cameras apparently need software refinement and even the location of the Touch ID sensor seemed to be causing Apple designers fits. The specter of a very limited supply of the iPhone 8 at launch is not what AAPL wanted. But it also has the iPhone 7s launching in September. That was expected to help carry the day, providing a new iPhone for those who want an immediate upgrade.
But a new report out of China says that the iPhone 7s is also facing production delays.
The iPhone 7s Late to Enter Mass Production?
China’s DigiTimes is reporting that the iPhone 7s is not expected to enter mass production until August. If it’s true that this model is not yet being produced at full volume, that puts it one to two months behind historical mass production times.
Apple typically needs several months of high volume production in order to have sufficient quantities of a new iPhone shipped and in stock in time for the traditional early September launch.
Any iPhone delay usually means launch shortages, and that would impact AAPL’s Q4 revenue. This year, the effect would be magnified by the fact that many potential iPhone buyers have been holding off on the iPhone 7 altogether in anticipation of the iPhone 8. If both the iPhone 8 and the iPhone 7s are in short supply, the company’s Q4 numbers could be grim instead of record setting. The pain could also extend into Q1 2018. And at that point, AAPL faces another threat.
Because of their September release, new iPhones typically have a window of six months or so before rival Samsung Samsung Electronics Co Ltd (OTCMKTS:SSNLF) launches its new flagship Galaxy smartphones. A significant iPhone delay means that sales window before competition heats up again is narrowed, giving AAPL less time to move new iPhones in big numbers. This cycle could be even more intense than usual because Samsung has confirmed it will launch its Galaxy Note 8 just weeks before the new iPhones.
The follow-up to last year’s ill-fated Galaxy Note 7 is going to be getting a lot of attention and could steal sales in the ultra-premium flagship market, especially if an iPhone delay means Apple doesn’t have the iPhone 8 or iPhone 7s Plus on shelves.
The DigiTimes report is the first time we’ve heard about production delays hitting the iPhone 7s. No reason was given for the latest apparent iPhone delay and Apple’s manufacturing partners are refusing to comment on the story. However, if true, AAPL’s plans for a dream quarter where two new major iPhone releases drive record sales may be looking shaky.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
