Apple’s Decision to Slash iPhone X Production Volume in Q1 2018 Could Delay Future OLED Models

Apple is set to halve its 40 million iPhone X production target in the three month period from January, reported Nikkei Asian Review on Monday without naming a source.


The U.S. tech giant notified suppliers that it had decided to cut the target for the period to around 20 million units, in light of slower-than-expected sales in the year-end holiday shopping season in key markets such as Europe, the U.S. and China.

The iPhone X, Apple's first smartphone equipped with an organic light-emitting diode display, has failed to catch on globally -- something many put down to a price tag starting at $999.
Part of the reason for the high price tag of iPhone X is said to be down to the cost of OLED panels made by Samsung, which is the only supplier of the component that can guarantee Apple a steady supply of the screens. According to Nikkei, Apple is now considering an increase to the proportion of LCD iPhone models by reducing production of the OLED screen models scheduled for release this year.

Apple is expected to launch a trio of new iPhone models in 2018, including 5.8-inch and 6.5-inch models with OLED displays and a 6.1-inch model with an LCD display, according to respected KGI Securities analyst Ming-Chi Kuo. However, at least one other analyst has predicted that the LCD-to-OLED ratio this year will actually be 2:1.

DigiTimes' Luke Lin believes Apple is increasingly leaning towards releasing two LCD-based models and a single larger 6.4- to 6.5-inch OLED model. Indeed, today's Nikkei report claims lackluster sales for iPhone X could actually result in a delay to the company's plans to introduce OLED screens in other models, potentially adding weight to DigiTimes' prediction.
The production cuts for the X will have a domino effect on manufacturers that have supplied high-performance components for the handset, with the combined impact expected to run into billions of dollars. It could also slow down the shift at display manufacturers from LCD to OLED technology.
Nikkei added that Apple is expected to maintain a total production target of 30 million units for lower priced models such as the iPhone 8, iPhone 8 Plus and iPhone 7. Apple Japan replied to Nikkei's request for comment by stating that it would confirm the details with headquarters.

Related Roundup: 2018 iPhones

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Taiwanese Apple Suppliers Face Falling Stock Prices Amid Ongoing Concern Over Weakened iPhone X Demand

Three major Apple suppliers faced falling stock prices on the Nikkei Asia300 Index today, believed to be directly related to "concerns over demand for iPhone X." The three Taiwanese suppliers were Largan Precision, Hon Hai Precision Industry (Foxconn), and Taiwan Semiconductor Manufacturing Company, dropping 4.4 percent, 1 percent, and 3 percent on the index, respectively.

iPhone X demand concerns and decline in supplier stock prices came after the latest analyst report by JP Morgan yesterday, predicting "slashed" iPhone X orders in the first part of 2018. In a research note reported by CNBC, analyst Narci Chang said "high-end smartphones are clearly hitting a plateau this year," singling out Apple by forecasting that iPhone X manufacturing "might be down 50 percent quarter-over-quarter."


Reports of "weakened" iPhone X demand heading into 2018 began emerging late last year, mainly stemming from analyst belief that the high price of the device would eventually lead to reduced sales after early adopters got their iPhone X. These reports have caused several Apple suppliers to be anxious over low order visibility for the full range of iPhone 8, iPhone 8 Plus, and iPhone X models in Q1 2018. CLSA analyst Nicolas Baratte argued that the reported reduction of the iPhone X's Q1 2018 shipment forecast from 50 million units down to 30 million units "remains inflated."

Despite multiple stories about the iPhone X's plateaued demand in early 2018, the smartphone is believed to have sold well following its fall launch in 2017 and throughout the holiday season. Research data shared just yesterday by Canalys reported that Apple shipped 29 million iPhone X units in Q4 2017, making the device the "world's best-shipping smartphone model over the holidays."

Earlier in January, Kantar Worldpanel said that the iPhone X saw "stellar" performance in several countries during November of last year, though it was outsold by the iPhone 8 and the iPhone 8 Plus in the United States. Combined, Apple's three new iPhones captured the top spots for best-selling smartphone models during the month. Kantar's global OS data pointed towards "staggering" demand for the iPhone X in China from users said to be switching sides from rival smartphone makers.

We should get a better view of how the iPhone X sold soon, when Apple reveals its earnings results for the first fiscal quarter of 2018 on Thursday, February 1.

Related Roundup: iPhone X
Buyer's Guide: iPhone X (Buy Now)

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iPhone Batteries Could Have Apple-Designed Power Management Chips Within Two Years

Apple is designing its own power management chips for use in iPhones within the next two years, according to Nikkei Asian Review.
Apple's new in-house power management chip would be the most advanced in the industry, according to the sources, and could have processing capabilities that allow it to better monitor and control power consumption among various components. That means iPhone users could expect devices capable of delivering better performance on lower power consumption.
Apple plans to replace around half of the main power management chips that go into iPhones with its own as early as 2018, but the transition could be delayed until 2019, according to anonymous sources cited in the report.

If the report is accurate, it could be a serious blow for Dialog Semiconductor, the British company that exclusively designs the current main power management chip for iPhone, iPad, and Apple Watch models. Apple reportedly accounted for nearly three quarters of Dialog Semiconductor's revenue in 2016.

The main power management chip controls an iPhone's battery, including charging capabilities and energy consumption. Apple's in-house version will supposedly be "the most advanced in the industry," which could pave the way for future iPhone models to have a better performance-to-battery life balance.

Taiwanese supplier TSMC will be the exclusive manufacturer of Apple's in-house power management chip, according to the report.

Today's report corroborates a prediction by Bankhaus Lampe analyst Karsten Iltgen, who earlier this year said that Apple will at least partially cut back on Dialog Semiconductor's supply of power management chips for future iPhones. Iltgen said Apple already has engineers working on the chips in California and Germany.

Dialog responded to the report with a statement claiming that "business relationships are in line with the normal course of business."

Dialog Semiconductor could be the second large British company to lose significant business from Apple within the next year or two. Imagination Technologies shares plunged after Apple informed the firm that it plans to stop using its PowerVR graphics technology in its devices within two years.

Apple appears to be moving towards in-house design of several components, potentially including ARM-based Mac processors and iPhone modems.


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Supply Chain Hints at Apple Releasing Augmented Reality Headset No Later Than 2019

Taiwanese manufacturer Quanta Computer, a primary assembler of the Apple Watch, has revealed that it is working on an augmented reality product for an undisclosed company that some industry observers believe is Apple.

Google Glass Enterprise Edition

Quanta's vice chairman C.C. Leung suggested the device will be a "headset-like gadget with a fully transparent lens that allows users to see through and interact with the environment," according to Nikkei Asian Review.

"Currently, we see such a device available in the market no later than the year 2019," he told reporters after the company's earnings conference.

Leung noted that if an augmented reality device could carry a price tag lower than $1,000, it would likely become a hit in the market, although it is unlikely he has any knowledge of Apple's pricing plans if they even exist yet.

Quanta is the second Apple supplier to mention involvement with an augmented reality product after fellow Taiwanese company Catcher Technology said it has been tapped to supply parts for an undisclosed wearable device.

Bloomberg was among the first to report on Apple's work on an augmented reality headset. It said Apple aims to have the technology ready by 2019, and could ship a finished product as early as 2020, which is a slightly longer timeline.

The headset's custom operating system, based on iOS, is reportedly dubbed "rOS" for "reality operating system."

Apple hasn't finalized how users will control the headset and launch apps, but it is investigating touchscreens, Siri voice activation, and head gestures as it creates prototypes, the report said.

Apple CEO Tim Cook alluded to any headset being at least a few years away during a recent interview about augmented reality.

"Today I can tell you that the technology itself doesn't exist to do that in a quality way," Cook said. "We don't give a rats about being first, we want to be best in creating people's experiences. Something that you would see out in the market any time soon would not be something that any of us would be satisfied with."

Cook has repeatedly expressed a "profound interest" in augmented reality, which he favors over virtual reality. Apple's ARKit platform on iOS 11 enables developers to integrate augmented reality features into iPhone and iPad apps, potentially laying the foundation for what's to come.

Related Roundup: Apple VR Project

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Future HomePod Models Could Include Face ID Technology

A new rumor out of Apple's supply chain over the weekend suggests future iterations of the HomePod could come with 3D-sensing cameras supporting Face ID, similar to the front-facing technology on the iPhone X. Specifically, Inventec Appliances president David Ho mentioned recently that the company sees a trend towards both facial and image recognition technology being incorporated into smart speakers, without specifying which speakers in particular (via Nikkei).

Ho made the comment following Inventec's latest earnings conference, and analysts listening predict that he was likely referring to "the next generation of Apple's HomePod." Inventec Appliances is currently the sole supplier of both Apple's AirPods and HomePod, but also makes Xiaomi smartphones, Fitbit devices, and Sonos speakers, among others. Given the company's ties to Apple, analyst Jeff Pu predicts Ho's comments could suggest a Face ID-enabled HomePod in 2019.

"We see trends that engineers are designing smart speakers that will not only come with voice recognition but also incorporate features such as facial and image recognition," President David Ho told reporters after the company's earnings conference.

Jeff Pu, an analyst at Yuanta Investment Consulting, said Apple could roll out HomePods with 3D-sensing cameras in 2019.
Ho said that facial recognition features "are set to make people's lives more convenient and to make the product easier to use." He further clarified his comments, however, citing hesitancy about whether smart speakers "with more AI features" would become popular.

HomePod is set to release in December, although Apple has yet to confirm a specific release date for the new device. The upcoming smart speaker was first revealed during WWDC in June, where Apple explained it would be a music-focused speaker with high quality sound, deep Siri integration, and spatial recognition for providing the best sound in any space. Even before it was officially announced, rumors of the device's production were connected to Inventec Appliances.

Over a year before its unveiling at WWDC 2017, Apple's "Siri Speaker" was rumored to include facial recognition of some kind as another leg up on competing Echo products from Amazon. At the time, sources with knowledge of Apple's project said the device would be "self aware" and able to bring up different user profiles as people walk into a room, "such as the music and lighting they like." The HomePod launching next month will lack any such features and instead be controlled mainly through voice-enabled user prompts with Siri.

Related Roundup: HomePod

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iPhone X Supply Estimated to Remain Extremely Tight Until Next Year Due to Earlier Production Issues

iPhone X shipments to customers will total around 20 million units through the end of the year, suggesting availability of the smartphone will be extremely tight through the holiday shopping season, according to Nikkei Asian Review.


The reduction, said to be only half of Apple's originally planned amount for this year, is reportedly due to production issues with the iPhone X's new TrueDepth camera and 3D facial recognition system that powers Face ID and Animoji.

The good news is that Apple's manufacturers have supposedly improved their yield rate, but only towards the end of September. iPhone X is currently being produced at an estimated rate of 10 million units per month.

Apple is also believed to have already started negotiations with other manufacturers over additional production of certain parts, and there is a chance that output volumes could improve rapidly, according to the report.

Today's report echoes what we've heard a seemingly countless number of times from multiple industry observers.

Yuanta Investment Consulting analyst Jeff Pu, for example, originally estimated there would be 45 million iPhone X devices available to purchase. His latest prediction has 36 million units available through the end of the year.

KGI Securities analyst Ming-Chi Kuo also cut his iPhone X shipment forecast for the fourth quarter to 25-30 million units, down from 30-35 million. He expects 2-3 million units will be shipped into distribution channels ahead of the launch.

iPhone X pre-orders begin Friday at 12:01 a.m. Pacific Time on Apple.com, while the device formally launches November 3.

Related Roundup: iPhone X
Buyer's Guide: iPhone X (Caution)

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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.

Related Roundup: iPhone X

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Apple Interested in Developing ARM-Based Mac Processors and iPhone Modems in House

Apple is continuing to expand manufacturing efforts related to the production of its own chips, according to a new report today by Nikkei, which stated that the company aims to "better compete" in the artificial intelligence field and reduce reliance on major suppliers like Intel and Qualcomm. Nikkei's sources said Apple's interest lies in building "core processors for notebooks, modem chips for iPhones, and a chip that integrates touch, fingerprint and display driver functions."

Apple has reportedly "invested in research and development" for baseband modem chips -- currently sourced from Intel and Qualcomm -- which are required for cellular communication features on Apple's mobile devices. Analysts pointed towards Apple's legal fight with Qualcomm, and its poaching of Qualcomm modem chip engineer Esin Terzioglu, as examples to bolster the theory that the Cupertino company is ready to build its own modem chips.

iPhone 8 teardown by iFixit

Building its own core processor chips for MacBooks would reduce Apple's dependence on Intel, with two industry sources stating that Apple would instead build its notebook chips using ARM Holding's technology, a British company that designs ARM architecture and licenses it out to other companies. Apple's interest in designing chips that integrate touch, fingerprint and display driver functions is said to be because the company "wants to control next-generation display technology and some related key components."

Multiple analysts provided theories behind Apple's move to design more of its own chips for its products, which included staying on the forefront of artificial intelligence, lowering production costs, better protecting proprietary technology, and more.
"By designing its own chips, Apple can better differentiate itself from others. Further, depending too much on other chip suppliers in the age of artificial intelligence will deter its development," said Mark Li, a Hong Kong-based analyst with Sanford C. Bernstein.

"We believe that more system houses will design their own chips. The purposes are to develop and protect their proprietary technology information, to make more efficient chips for their unique need, to lower [costs] and to do inventory control better and keep all logistic operation confidentially," Samuel Wang, a U.S.-based analyst at research company Gartner, said..
Apple has long designed and built the core processing chips found in iPhones and iPads, but this year reports began to emerge of the company's hope to expand the amount of internal iOS device components that it creates on its own. In April, Apple informed Imagination Technology that it would stop using its graphics technology over the next two years, aiming to make its own graphics processing chips and lessen its reliance on the supplier. Less official was a prediction by analyst Karsten Iltgen that Apple would drop Dialog Semiconductor from its supply chain and move to its own in-house power management chips for iPhones by 2019.

This week, Apple was part of a consortium that purchased Toshiba's much-sought-after NAND memory chip unit for $17.7 billion, another move that will eventually allow Apple to be less reliant on other suppliers for device components. Still, many of Apple's in-house chip production lines are many years off, with analyst Mark Li stating that it's "unlikely" Apple will be able to debut its own components -- specifically referring to the modem chips -- within the next two years.


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Estimated Supply of iPhone X on Launch Day Revised Down to Just Over 12 Million Units

When the iPhone X launches on November 3, initial supply of the smartphone available to purchase could be limited to around 12 million units, according to Jeff Pu, an analyst at Taipei-based Yuanta Investment Consulting.


Pu told Nikkei Asian Review that Foxconn likely manufactured around 2 million iPhone X devices in September. He said the number should increase to 10 million in October, and reach a total of 40 million by the end of the year, down from his original forecast of 45 million units earlier this year.

If accurate, that means there would be just over 12 million iPhone X handsets available to purchase when the device launches in under six weeks.

The report corroborates that the TrueDepth camera and facial recognition system is a major bottleneck for iPhone X production, as KGI Securities analyst Ming-Chi Kuo said in a research note earlier this week.
Two executives working for iPhone suppliers told Nikkei Asian Review that 3-D sensor part makers are still struggling to reach a satisfactory level of output, and to boost their yield rate. This 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.
Reports about limited availability surrounding an iPhone launch surface every year, but rumors suggest the iPhone X might be even harder to get your hands on than a 256GB iPhone 7 Plus in Jet Black last year.

Related Roundup: iPhone X
Tags: nikkei.com, Jeff Pu

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HomePod Supplies Limited at Launch, but Foxconn Coming on Board in 2018 to Increase Production

Inventec Appliances has been a rumored supplier for Apple's HomePod smart speaker since before the device was announced at WWDC in June, and now the manufacturer has indicated that supplies for HomePod might be limited at launch, in line with most Apple product launches (via Nikkei).

The news came from Inventec Appliances president David Ho during a press conference today. Although his comments never specifically mentioned "HomePod," the estimated time frame given for the release of the product -- late in 2017 -- and its description as a high-profile "smart home device," suggest it to be Apple's upcoming speaker. At WWDC, Apple confirmed that the HomePod would launch sometime in December.


Now, Ho has stated that the HomePod's contribution to the company's revenue for this year will be "fairly limited" -- which is expected given the device is launching so late in the year -- with optimistic improvements to profit gained from HomePod sales predicted for early 2018. One analyst speculated that the number of HomePod units shipped in December 2017 will be around 500,000.
“We will finally ship the smart home device this year, but its contribution will be fairly limited and hopefully that will improve next year,” Inventec Appliances President David Ho told analysts and reporters during an earnings conference.

“Inventec Appliances will likely only ship some 500,000 units of HomePod this year, and the device’s contribution to the group’s revenue will be less than 1%,” said Arthur Liao, an analyst at Taipei-based Fubon Securities.
In 2018, Apple will look to open up HomePod manufacturing to more than just Inventec Appliances, according to one of Nikkei's sources, who stated that Apple is planning to add Foxconn into the HomePod supply chain next year. This will result in Inventec Appliances and Foxconn receiving a "split" of HomePod orders and boosting production for the smart home speaker, following the limited initial launch.

Inventec Appliance's total smart home and connected devices shipments are expected to grow to between 70 and 75 million units by the end of 2017, but company officials didn't specifically break down the numbers related to the Apple products it makes.

In addition to HomePod, Inventec Appliances also manufactures Apple's AirPods, which have been particularly difficult for many users to purchase since the wireless earphones launched last December. Earlier in August, the estimated shipping date for AirPods finally lowered to four weeks from six weeks, which had been the shipping estimate for the previous eight months.

Related Roundup: HomePod
Tags: Foxconn, nikkei.com

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