September 26, 2017 10:40 pm JST

Uncertainties for iPhone X production over 3-D sensor issues

Investors cool to launch of Apple's iPhone 8

DEBBY WU, Nikkei staff writer

Phil Schiller, Apple's senior vice president of worldwide marketing, announces features of the new iPhone X at the Apple campus in Cupertino, California on Sept. 12, 2017. © AP

TAIPEI -- Problems with production of 3-D sensors for facial recognition are still plaguing Apple's premium iPhone X, but it is unclear if this will impact supply of the new phone, scheduled to ship in early November.

Apple introduced facial recognition to unlock phones and to authenticate payments for the first time with the iPhone X. The new function is not available on lower-priced iPhone 8 models. 

However, the iPhone X has been troubled by a number of production issues. Its shipment date of Nov. 3 is much later than that of the iPhone 8 and iPhone 8 Plus, which launched earlier this month.

Two executives working for iPhone suppliers told Nikkei Asian Review that makers of 3-D sensor parts are still struggling to reach a satisfactory level of output, and to boost their yield rate. The rate measures the number of usable or saleable units from a batch of components or final products produced. A low yield rate is likely to hurt a company's margins and bottom line. 

Both sources were unable to offer clarity on whether Apple could meet demand after launch of the iPhone X. One said the phone was being produced in small quantities, around tens of thousands daily. 

Jeff Pu, an analyst at Taipei-based Yuanta Investment Consulting, also identified the 3-D sensors as the only major issue remaining. He said that he expected mass production to begin in the second week of October, and that the phones would begin to be distributed globally a week later. 

iPhone X is assembled exclusively by Hon Hai Precision Industry, or Foxconn Technology Group, at its factory in the central Chinese city of Zhengzhou.

According to Pu's estimate, Foxconn churned out 2 million units of the iPhone X in September, and in October that number should rise to 10 million. He said that Foxconn will have assembled a total of 40 million iPhone X phones by year-end, lower than his estimate of 45 million earlier this year. 

"Supply will still be tight after Nov. 3," Pu noted. 

iPhone 8 suffers

With the iPhone X still more than a month away from reaching consumers, initial appetite for the iPhone 8 and iPhone 8 Plus appears to be weak. The iPhone 8 range sports a liquid crystal display like previous Apple phones, while the new model adopts an organic light-emitting diode, or OLED, screen that offers sharper color contrast. 

Some recent reports suggest that the delayed shipment may have dampened demand as well. 

One of the sources said that demand for the iPhone 8 and iPhone 8 Plus appears to be weaker than that of their predecessors, but did not provide figures. 

Amid muted reaction to the iPhone 8 series, shares of Apple and its suppliers have been hit in recent days. 

Apple stock fell about 6% to close at $150.55 by Monday since it unveiled the new phones on Sep 12. Hon Hai, meanwhile, has lost some 11% since then, and its smaller rival Pegatron has shed about 17%. 

Both Apple and Foxconn declined to comment. 

Asia300

Hon Hai Precision Industry Co., Ltd.

Taiwan

Market(Ticker): TAI(2317)
Sector:
Industry:
Electronic Technology
Computer Peripherals
Market cap(USD): 60,354.73M
Shares: 17,328.73M
Asia300

Pegatron Corp.

Taiwan

Market(Ticker): TAI(4938)
Sector:
Industry:
Electronic Technology
Computer Processing Hardware
Market cap(USD): 6,152.14M
Shares: 2,614.53M

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