PALO ALTO/TAIPEI -- Apple is preparing the ground to possibly delay the launch of its first 5G iPhones as the coronavirus pandemic threatens global demand and disrupts the company's product development schedule, sources familiar with the matter have told the Nikkei Asian Review.
The Cupertino, California-based tech giant has held internal discussions on the possibility of delaying the launch by months, three people familiar with the matter said, while supply chain sources say practical hurdles could push back the release, originally scheduled for September.
"Supply chain constraint aside, Apple is concerned that the current situation would significantly lower consumer appetite to upgrade their phones, which could lead to a tame reception of the first 5G iPhone," said a source with direct knowledge of the discussion. "They need the first 5G iPhone to be a hit."
Apple is already a year behind its two biggest rivals -- Samsung Electronics and Huawei Technologies -- in introducing a 5G-capable handset. At the start of the year, the company set an aggressive target for the release of a 5G iPhone, instructing mobile suppliers to prepare to make up to 100 million units of the new devices for 2020 and designing four different models of the handsets, sources told Nikkei.
Now, Apple is closely monitoring the outbreaks in the U.S. and Europe, its two largest markets that together account for more than half of its sales, and assessing whether a delay is necessary, the sources told Nikkei.
A large number of employees at Apple's headquarters are working from home indefinitely, as the company is subject to the California government's "shelter in place" order, which requires all workers at non-essential businesses to stay home. The exact timetable for the 5G iPhone launch might not be finalized till that order is lifted, one of the sources said.
"Apple will make a final decision around May at the latest, given the fluid situation globally," another person told Nikkei.
Apple declined to comment for this story.
The engineering development of the 5G iPhone has also been affected by travel curbs introduced in the U.S., China and elsewhere to combat the coronavirus, two people with knowledge of Apple's schedule said. The company was supposed to work with suppliers to develop a more concrete prototype for the new phones from early March, but it had to delay such close collaboration, which requires hands-on testing, until the end of the month, before postponing it again due to the worsening pandemic in the U.S., they said.
Suppliers have not been officially notified of a possible change in the production timeline, and Apple is even urging many of them to make up for time lost due to coronavirus-related disruptions.
"We are not giving it up yet. We are doing whatever we can to sort the issue out," a person with direct knowledge of the matter told Nikkei.
"The discussion is still at an early stage, and the fall launch is not completely off the table," one of the sources with direct knowledge of the issue said. "But the 5G iPhone could be postponed to 2021 in the worst-case scenario."
Suppliers agree that given where the company is in the engineering process, the possibility of a delay is looming.
Some component suppliers, moreover, have told Nikkei that they have been instructed to defer their mass production schedule for about two to three months.
"We have been notified to start shipping in big volumes to meet Apple's new product launch by the end of August, instead of like in previous years, when it would be sometime in June," said a supplier of components related to printed circuit boards. "The change was made very recently, and that could imply that the mass production of the phone could also be delayed for months."
The worst-case scenario, delaying the launch until 2021, would do more than just disrupt Apple's roadmap for product releases.
The decision of the world's most profitable smartphone company involves hundreds of global suppliers in the U.S., Europe, Japan, South Korea and China, Apple's biggest manufacturing hub. Millions of production line jobs could be affected in the world's second-largest economy during the peak production season for iPhones in the second half of the year.
"It's a very tough decision for Apple to make," as the ripple effect would be very big, another source familiar with the discussion told Nikkei.
"If any big tech company like Apple delay its plan for important new products ... the issue could be even bigger than whether the supply chain could meet its schedule. It implies that they really see end demand weakening and the whole economy not recovering soon," Joey Yen, an analyst with research company IDC, told Nikkei. "As of now we are still hoping everything can gradually recover to normal by the end of this year but for now the scenario is moving toward the pessimistic side, that the global economy could be significantly impacted."