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 only 2-3 million units will be shipped for sale before the launch on November 3rd, with supply shortages still existed for several components including circuit boards for the iPhone X antenna and wide angle camera, and the depth-sensing Infrared dot projector.
According to Kuo, the ‘biggest hurdle’ for iPhone X shipments is actually the flexible printed circuit board for the antenna system. He says special materials, processes and stringent tests are required for Apple to sign off on produced iPhone X antenna components, with much higher specifications than iPhone 8 or other models.
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.
Finally, the last bottleneck is the TrueDepth camera's infrared dot projector, that has received significant attention in recent weeks. According to Kuo, previous design issues that led to poor facial recognition have been addressed and the "worst is behind us."
The good news is that KGI believes production of the circuit boards and dot projector will be able to increase drastically across November which should allow Apple to increase iPhone X output quickly after the release. With that being said , KGI has dropped estimates for initial fourth quarter shipments from 30-35 million to 25-30 million units. Lastly, KGI says shipments will "pick up markedly" in the first quarter of 2018.
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