KGI: iPhone X Production Woes Ending, but Only 2–3 Million Units Available for Launch

With just one week to go until pre-orders for the iPhone X begin, KGI Securities analyst Ming-Chi Kuo has released a new report indicating that the "worst [will] soon [be] over" with regards to production difficulties.


According to Kuo, the biggest hurdle has likely been the flexible printed circuit board (FPCB) for the device's antenna, due to increased complexity and initial supply chain partner Murata's inability to meet specifications.
Special materials, recipes, design, processes, equipments and tests are required for antenna FPCB, as the specifications for iPhone X antenna (supplied by Amphenol (US)) are higher than those of iPhone 8 and only Murata (JP) and Career Tech (6153 TT, NT$30.1, NR) can meet Apple's requirements. Murata (originally with a 60% order allocation or higher) won't be able to resolve its issues before 2Q18, and thus has been fully replaced by second supplier Career. We believe Career will ramp up in November, as capacity expansion takes time, and its materials, recipes, design, processes, equipments and tests are different from those of Murata.
A secondary bottleneck appears to have been the FPCB for the wide-angle rear camera lens. Unlike competing dual-lens camera smartphones from Samsung and Huawei, the iPhone X's wide-angle and telephoto lenses use separate PCBs, and supplier Interflex has reportedly struggled with quality issues on the part for the wide-angle lens.

The third bottleneck that has received signifcant attention in recent weeks is the TrueDepth camera's infrared dot projector, or the "Romeo" component. According to Kuo, previous design issues that led to poor facial recognition have been addressed and the "worst is behind us."

Overall, Kuo is cutting his iPhone X shipment estimates for the fourth quarter to 25–30 million units, down from 30–35 million, and he expects that 2–3 million units will be shipped into distribution channels ahead of the launch. As a result, initial supplies will be very tight, as has been extensively rumored. Kuo says shipments will "pick up markedly" in the first quarter of 2018.

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iPhone 8 and 8 Plus Production Will Reportedly Drop Nearly 50% When iPhone X Launches

Apple has reportedly asked its suppliers to reduce iPhone 8 and iPhone 8 Plus production by nearly 50 percent in November and December, according to Reuters, which cited China's Economic Daily News.


The report quotes an unnamed source who claims it is the first time in the iPhone's history that new models face a major cutback so shortly after mass production began. iPhone 8 and iPhone 8 Plus officially went on sale September 22.

Apple shares declined around 1.5 percent in pre-market trading as investors reacted to concerns about low sales of the devices.

Apple hasn't revealed iPhone 8 and iPhone 8 Plus sales numbers. The company will report its fourth quarter earnings results on November 2, including iPhone sales, but it doesn't break out the number on a model-by-model basis.

Even if iPhone 8 and iPhone 8 Plus sales have in fact been lower than expected, it could be a sign of pent up demand for the upcoming iPhone X.

With an OLED display, nearly 82 percent screen-to-body ratio, and a TrueDepth camera system powering 3D facial recognition features like Face ID and Animoji, the iPhone X is unlike any other smartphone Apple has ever sold.

Apple analysts are patiently waiting to see how many customers are holding out to purchase the flagship smartphone when pre-orders begin October 27. iPhone X officially launches November 3, starting at $999 in the United States.

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iPhone X Parts Suppliers Reportedly on Schedule to Meet 2017 Production Demand

Yield rates for some iPhone X components have improved and become more stable, allowing for shipments of the upcoming smartphone to grow substantially after October, according to sources from Apple's supply chain.

Yesterday it was reported that Apple manufacturer Foxconn has started shipping its first iPhone X units from its main plant in Zhengzhou, China. The same sources are now reporting improved production yield rates for key parts such as the 3D sensing modules, signaling the first positive indicator from suppliers previously struggling to meet Apple's demand.

The first batch of iPhone X devices has already been shipped out from Foxconn Electronics' site in Zhengzhou (Henan, China), said the sources. With production yield rates for certain key components such as 3D sensing modules improving, shipments of the device have increased gradually and will meet Apple's demand ahead of the Christmas and New Year's holidays, the sources indicated.
DigiTimes quoted sources at analog IC vendors who said that chip deliveries for the iPhone X have been on schedule up to now, with orders fulfilled on time for the device in the third quarter. The same sources claimed they were not aware of any production delays or shipment cutbacks, contradicting media reports and analyst claims of supply issues, particularly with respect to tricky-to-manufacture 3D sensing modules used in Apple's new TrueDepth camera.

Chip orders for the iPhone X are now expected to grow through the fourth quarter of 2017, before slowing down in the first quarter of the following year, said the sources.

At the same time however, other supply chain sources have sounded a note of caution over the late availability of the iPhone X and worries about pre-order demand for the device outstripping supply, with a supply/demand balance not achievable until the first quarter of 2018.

There are some suggestions that iPhone 8 and iPhone 8 Plus sales have been lower than expected, as the public bides their time until the more feature-rich iPhone X hits stores, although with no actual sales figures at hand, this is still purely speculation.

Pre-orders for the iPhone X start on Friday, October 27, with the device's official launch the following Friday, November 3.

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Foxconn Ships First Batch of iPhone X Units

Apple manufacturer Foxconn has started shipping the first iPhone X units to countries in Europe and the Middle East, according to a Chinese report on Monday.

China-based Xinhuanet said the first batch of 46,500 units have already been shipped out from Zhengzhou and Shanghai to the Netherlands and the United Arab Emirates, respectively. However, the initial shipments of iPhone X units were much lower than previous iPhone models, according to the Chinese-language Commercial Times.

Although Foxconn has ramped up its output of iPhone X to 400,000 units a week recently from the previous 100,000 units, the increased production still cannot meet market demand, said the report, citing data from Rosenblatt.
Forecasts for iPhone X production have consistently pointed to lower-than-average numbers in the run-up to the smartphone's launch on Friday, November 3. Last week an analyst with Taipei-based Yuanta Investment Consulting lowered his production estimate for the iPhone X to 36 million units, down from 40 million.

The revised forecast followed earlier warnings that Apple's TrueDepth camera may be the main production bottleneck of the iPhone X ramp. KGI Securities analyst Ming-Chi Kuo has said the facial recognition system is "far more complex" than those on competing devices, which is making it challenging for Apple to achieve mass production.

Kuo said shipments of iPhone X components will likely ramp up in mid to late October. Meanwhile, customer pre-orders begin October 27, with the potential for them to exceed 40-50 million units, according to Kuo, further suggesting the phone could be hard to come by for some time. Lower adoption of the iPhone 8 and iPhone 8 Plus also indicate that many customers may be waiting for the iPhone X.

(Via DigiTimes.)

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Foxconn Ships First Batch of iPhone X Units

Apple manufacturer Foxconn has started shipping the first iPhone X units to countries in Europe and the Middle East, according to a Chinese report on Monday.

China-based Xinhuanet said the first batch of 46,500 units have already been shipped out from Zhengzhou and Shanghai to the Netherlands and the United Arab Emirates, respectively. However, the initial shipments of iPhone X units were much lower than previous iPhone models, according to the Chinese-language Commercial Times.

Although Foxconn has ramped up its output of iPhone X to 400,000 units a week recently from the previous 100,000 units, the increased production still cannot meet market demand, said the report, citing data from Rosenblatt.
Forecasts for iPhone X production have consistently pointed to lower-than-average numbers in the run-up to the smartphone's launch on Friday, November 3. Last week an analyst with Taipei-based Yuanta Investment Consulting lowered his production estimate for the iPhone X to 36 million units, down from 40 million.

The revised forecast followed earlier warnings that Apple's TrueDepth camera may be the main production bottleneck of the iPhone X ramp. KGI Securities analyst Ming-Chi Kuo has said the facial recognition system is "far more complex" than those on competing devices, which is making it challenging for Apple to achieve mass production.

Kuo said shipments of iPhone X components will likely ramp up in mid to late October. Meanwhile, customer pre-orders begin October 27, with the potential for them to exceed 40-50 million units, according to Kuo, further suggesting the phone could be hard to come by for some time. Lower adoption of the iPhone 8 and iPhone 8 Plus also indicate that many customers may be waiting for the iPhone X.

(Via DigiTimes.)

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Kuo: All iPhone Models in 2018 Likely to Abandon Fingerprint Recognition

All of the iPhones Apple plans to produce in 2018 are likely to abandon the Touch ID fingerprint sensor in favor of facial recognition, KGI Securities analyst Ming-Chi Kuo told investors in a note sent out this evening.

According to Kuo, Apple will embrace Face ID as its authentication method for a competitive advantage over Android smartphones. Kuo has previously said that it could take years for Android smartphone manufacturers to produce technology that can match the TrueDepth camera and the Face ID feature coming in the iPhone X.

We predict all new 2H18F iPhone models will likely abandon fingerprint recognition. We believe this change will allow all new models to realize a competitive advantage via differentiation, on the back of an integrated user experience of full-screen design and TrueDepth Camera/ Facial recognition/ Face ID/ AR applications.
Face ID, says Kuo, will continue to be a major selling point of the new iPhone models in 2018, with Apple planning to capitalize on its lead in 3D sensing design and production.

Kuo's prediction suggests that all upcoming 2018 iPhones will feature a full-screen design with minimal bezels like the iPhone X, meaning no additional models with the iPhone 8/iPhone 8 Plus design would be produced.

That would spell the end of the line for Touch ID in the iPhone, which has been available as a biometric authentication option since 2013. It's not clear what that means for the Mac and the iPad, but Kuo has said he expects next year's iPad Pro models to transition to Face ID.

Should Apple decide to abandon Touch ID, it also means development would potentially end on a rumored under-display Touch ID solution.

Back in September, Kuo predicted 2018 iPhones would fully adopt the TrueDepth camera and facial recognition if Face ID was "well received" by customers, but further research conducted by KGI Securities has led him to believe it will indeed be successful, leading to today's more definitive prediction.

Kuo believes that Apple's transition away from Touch ID will also turn Android smartphone manufacturers away from fingerprint recognition. As he said in an earlier note, he expects high-end Android smartphones to "ditch" under-display optical fingerprint recognition in favor of 3D sensing techniques.

Despite Kuo's prediction, Apple software engineering chief Craig Federighi recently hinted that Apple may not be ready to abandon Touch ID across all its products just yet. While he said Face ID is the future of biometric authentication, he also noted that there are settings where different biometric techniques or combinations of biometrics could make sense.

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Kuo: All iPhone Models in 2018 Likely to Abandon Fingerprint Recognition

All of the iPhones Apple plans to produce in 2018 are likely to abandon the Touch ID fingerprint sensor in favor of facial recognition, KGI Securities analyst Ming-Chi Kuo told investors in a note sent out this evening.

According to Kuo, Apple will embrace Face ID as its authentication method for a competitive advantage over Android smartphones. Kuo has previously said that it could take years for Android smartphone manufacturers to produce technology that can match the TrueDepth camera and the Face ID feature coming in the iPhone X.

We predict all new 2H18F iPhone models will likely abandon fingerprint recognition. We believe this change will allow all new models to realize a competitive advantage via differentiation, on the back of an integrated user experience of full-screen design and TrueDepth Camera/ Facial recognition/ Face ID/ AR applications.
Face ID, says Kuo, will continue to be a major selling point of the new iPhone models in 2018, with Apple planning to capitalize on its lead in 3D sensing design and production.

Kuo's prediction suggests that all upcoming 2018 iPhones will feature a full-screen design with minimal bezels like the iPhone X, meaning no additional models with the iPhone 8/iPhone 8 Plus design would be produced.

That would spell the end of the line for Touch ID in the iPhone, which has been available as a biometric authentication option since 2013. It's not clear what that means for the Mac and the iPad, but Kuo has said he expects next year's iPad Pro models to transition to Face ID.

Should Apple decide to abandon Touch ID, it also means development would potentially end on a rumored under-display Touch ID solution.

Back in September, Kuo predicted 2018 iPhones would fully adopt the TrueDepth camera and facial recognition if Face ID was "well received" by customers, but further research conducted by KGI Securities has led him to believe it will indeed be successful, leading to today's more definitive prediction.

Kuo believes that Apple's transition away from Touch ID will also turn Android smartphone manufacturers away from fingerprint recognition. As he said in an earlier note, he expects high-end Android smartphones to "ditch" under-display optical fingerprint recognition in favor of 3D sensing techniques.

Despite Kuo's prediction, Apple software engineering chief Craig Federighi recently hinted that Apple may not be ready to abandon Touch ID across all its products just yet. While he said Face ID is the future of biometric authentication, he also noted that there are settings where different biometric techniques or combinations of biometrics could make sense.

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iPhone X Supply Revised Lower Yet Again as TrueDepth System Still Faces Production Issues

A new report today yet again suggests that customers looking to get an iPhone X this year might face quite the challenge.


Jeff Pu, an analyst with Taipei-based Yuanta Investment Consulting, has cut his forecast of the number of iPhone X devices that will be produced this year from 40 million units to 36 million. It's the second time he has revised down his estimate, which originally totaled 45 million earlier this year.

The underlying reason is that Apple's suppliers are still struggling to perfect manufacturing of the iPhone X's TrueDepth camera and 3D facial recognition system, according to Japan's Nikkei Asian Review. We first heard about the production issues from KGI Securities analyst Ming-Chi Kuo a few weeks ago.

Multiple reports have claimed it has taken more time to assemble the TrueDepth system's so-called "Romeo" module than the "Juliet" module.

The "Romeo" module reportedly includes the dot projector that beams more than 30,000 invisible dots to create a precise depth map of your face, while the "Juliet" module includes the infrared camera that analyzes the pattern. Together, they help power new iPhone X features such as Face ID and Animoji.

Pu maintained his belief that the iPhone X will enter mass production in mid-October and begin to be shipped from China to the first wave of launch countries next week. iPhone X pre-orders begin Friday, October 27, just over two weeks from now. The device officially launches Friday, November 3.

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Himax Begins Shipping Wafer-Level Optics Technology for iPhone X’s Face ID

Fabless semiconductor company Himax Technologies has begun shipments of chips based on wafer-level optics (WLO) technology to Apple, according to industry sources (via DigiTimes). The solution is reportedly a key component of the Face ID facial authentication sensor exclusive to the upcoming iPhone X.

ChipMOS Technologies will also see revenues generated from orders for WLO chips increase substantially later in 2017 as the backend house has cut into the supply chain for the iPhone X by partnering with Himax, said the sources. ChipMOS' revenues from orders for WLO chips are expected to reach between NT$50 million (US$1.66 million) and NT$60 million, up from the current NT$20-30 million, the sources indicated.
Apart from Apple's demand for the WLO chips, HiMax and its backend partner ChipMOS are gearing up for a busy 2018, with Android phone makers expected to follow Apple's lead by bringing facial recognition features to their own devices.

According to a recent research note by KGI Securities analyst Ming-Chi Kuo, Apple has tilted interest in the mobile industry away from under-display fingerprint recognition, and instead towards camera-based 3D sensing technologies as the ideal user authentication solution. Kuo believes the next two to three years will see shipments of 3D sensor-equipped Android devices to exceed those with under-display fingerprint recognition by a factor of two or three or more.

In line with Kuo's analysis, industry sources claim Qualcomm's recently announced 3D depth-sensing solution, jointly developed with Himax, is directly targeted at orders from the Android camp, with solutions from Orbbec and Mantis Vision also jostling to business. Himax and ChipMOS declined to comment on specific customers and orders.

In related news, supply chain sources speculate that Apple may delay iPhone X shipments otherwise the supply of the device could be limited this year due to yield problems with key components for new features that require 3D sensing modules. Apple is allegedly waiting to see how many iPhone X pre-orders it receives, and monitoring how well the already-released iPhone 8 and iPhone 8 Plus sell, before fully ramping up production overseas.

A report last month claimed Apple's suppliers are shipping only about 40 percent of the components originally planned for initial production of the iPhone X, with Kuo subsequently claiming the 3D sensing components used in the TrueDepth camera, which represents a far more complex structure than those of rivals, may be the main production bottleneck.

Kuo said shipments of iPhone X components will likely ramp up in mid to late October. Given pre-orders begin October 27, with in-store availability starting November 3, all signs point towards the iPhone X being in extremely short supply.

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Apple Working With LG Display on Future Foldable iPhone

Apple is developing an iPhone with a foldable display alongside LG Display, reports Korean site The Investor. Apple is said to have chosen to work with LG and not Samsung out of fears that Samsung could get ahold of sensitive tech.

This is not the first time we've heard rumors of a future iPhone with a foldable display. Back in December of 2016, rumors suggested LG's display division would begin mass-producing foldable displays for smartphones as early as 2018, with Apple said to be one possible partner.


LG has shown off several foldable display prototypes over the last two years, including one that folds over like a book and a second that rolls up much like a newspaper. LG's foldable displays use flexible OLED panels and LG has been working to increase durability and yield rate.

LG is said to have recently created a dedicated task force to start developing a foldable OLED display for a future iPhone, while its siser company LG Innotek has a team developing a rigid flexible printed circuit board or (RFPCB) to go along with it.

Folding display technology is a ways off from launch, and unnamed industry sources believe panel production for an iPhone with a folding display won't kick off until 2020, which is more than two years from now.

Samsung supplies the OLED displays for the iPhone X and is also expected to supply OLED panels for Apple's 2018 iPhones, but LG recently started OLED production for phones at a factory in China and has plans to begin supplying Apple with panels as early as 2019.

Next year's devices will not include foldable display tech, but we have heard rumors suggesting an all-OLED lineup with two OLED devices in 5.85 and 6.46-inch sizes.

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