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Apple, Foxconn executives to meet amid iPhone X production strain

Issue with facial recognition component persists and unlikely to be resolved soon

TAIPEI/OSAKA/TOKYO -- Terry Gou, the chairman of key iPhone assembler Hon Hai Precision Industry, also known as Foxconn Technology Group, and Apple Chief Operating Officer Jeff Williams are planning to meet when the latter visits Taiwan later this month, according to two industry sources.

The meeting comes at a time when iPhone X production continues to be plagued by problems with the dot projector, a component in the 3-D sensor module used for facial recognition.

Williams will be visiting Taiwan for the 30th anniversary of Taiwan Semiconductor Manufacturing Co., the sole core processor supplier for the iPhone line this year. An event marking the celebration will take place on Oct. 23.

Jeff Williams, COO of Apple   © Reuters

Foxconn is the sole assembler for iPhone X, while Foxconn-controlled Sharp Corporation and South Korea's LG Innotek, a material and component manufacturing unit of LG Electronics, are responsible for assembling 3-D sensor modules.

The Nikkei Asian Review in late September first reported on how the 3-D sensor module was affecting iPhone X production. Sources later said that Gou visited Sharp's facilities in early October to help resolve related issues.

Sharp executives recently told the Nikkei Asian Review that the yield rate has improved gradually.

Terry Gou, chairman of Hon Hai Precision Industry

The yield rate refers to the number of usable units in a batch of components or products produced in a manufacturing process, and it affects a company's margins and bottom line.

But a tech industry executive familiar with the 3-D sensor issue said that while the yield rate has improved, it has not reached a satisfactory level.

"The temperature may be down a bit, but the fever persists," the executive said.

The executive added that the yield rate for 3-D sensors will not reach a level that will allow suppliers to churn out the iPhone X at their full capacity by the end of October.

LG Innotek declined to comment.

Apple will begin taking pre-orders for iPhone X on Oct. 27, and the premium handset will go on sale on Nov. 3.

While sources did not say what issues Gou and Williams will discuss, it can be expected that the two will look at how to deal with the manufacturing bottleneck for iPhone X, Apple's most anticipated handset since the iPhone 6 range.

Apple did not respond to an email seeking comments. Foxconn declined to comment.

Another challenging situation that Williams could encounter in Taiwan is that he will be joined by Qualcomm Chief Executive Steven Mollenkopf at the TSMC event at a time when the two U.S. technology giants are entangled in a string of lawsuits over the American chipmaker's licensing practices.

Qualcomm supplies baseband chips, used for phone calls, for iPhones and iPads.

The iPhone X production issues were nearly compounded in late September when Toshiba, a memory supplier, ran into some production hiccups. However, market watchers and industry executives say the issue should not have a major impact on Apple's flagship handset.

Jeff Pu, an analyst at Taipei-based Yuanta Investment Consulting, estimates that for the current quarter, production volume of the iPhone 8 and 8Plus together will be around 32 million units, while suppliers aim to make 35 million units of iPhone X.

"For the first quarter of 2018, Apple will slash orders for the iPhone 8 range by 50% compared with the current quarter to only 16 million or so units, while they hope to produce 39 million iPhone X handsets next quarter to address the likely strong demand," Pu said. 

Nikkei staff writers Cheng Ting-fang and Kensaku Ihara in Taipei, and Kim Jaewon in Seoul contributed to this report.

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