Improving production yields on iPhone 5 expected to boost profitability for Apple

Posted:
in iPhone edited January 2014
Supply of the iPhone 5 continues to improve as yield rates on the difficult-to-build handset have reportedly grown, reducing costs and boosting profitability for Apple and its suppliers.

Shaw Wu of Sterne Agee checked with members of Apple's overseas supply chain, and was told that yields on the iPhone 5 are still improving. The progress comes as estimated shipping times from Apple's online store have improved to between two and four days, while the handset is set to launch in more than 50 countries this month.

Availability of the iPhone 5 is improving despite what Wu referred to as "robust demand" for the device. He expects Apple will sell 47.3 million units in the December quarter, a forecast slightly greater than market consensus of between 45 million and 46 million iPhones sold during the holiday quarter.

Word of improved production of the iPhone 5 also prompted Wu to increase his gross margin forecast for Apple's current quarter. He now believes Apple will achieve margins of 38.5 percent during the three-month frame, up from a previous prediction of 38 percent.

Apple was said to have faced a number of issues in manufacturing the redesigned iPhone 5. An official with Apple assembly partner Foxconn reportedly said the iPhone 5 was "the most difficult device" it has ever been tasked with building.

iPhone 5


While supply of the iPhone 5 is now said to be improving, Apple has not been able to catch up with demand for the iPad mini. Wu said his checks found that iPad mini demand is stronger than expected, and that's believed to be the key reason why lead times remain at two weeks.

Apple is also facing issues with its redesigned iMac lineup, as the new ultra-thin design has reportedly resulted in manufacturing yields. As a result, Wu expects that Mac sales for the December quarter will be lighter-than-anticipated, thanks to limited iMac availability as well as what he called "minor cannibalization" from the iPad and iPad mini.

Accordingly, Wu has reduced his forecast for Mac sales to 5 million, down from his previous prediction of 5.1 million, and also lower than market consensus of between 5.2 million and 5.3 million.

In all, Wu expects Apple's holiday will result in $54.6 billion in revenue and $13.70 in earnings per share, higher than consensus expectations of $54.4 billion and $13.30. For fiscal 2013, he predicts Apple will earn $193.4 billion in revenue and $49.50 in earnings per share, also higher than market consensus of $193 billion and $49.28.
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Comments

  • Reply 1 of 25


    What a droll headline - as if improving yield might not be expected to boost profitability.

  • Reply 2 of 25
    I expect Apple earning per share will be 15.55 USD .
  • Reply 3 of 25
    sr2012sr2012 Posts: 896member
    Pity about Samsung being dicks and charging Apple 20% more, apparently:
    http://www.dailytech.com/Report+Samsung+Now+Charging+Apple+20+More+for+iPhone+Processors/article29166.htm
  • Reply 4 of 25
    mazda 3smazda 3s Posts: 1,576member

    Quote:

    Originally Posted by ankleskater View Post


    What a droll headline - as if improving yield might not be expected to boost profitability.



     


    Yeah, I thought that was odd too. What next, having unprotected sex could lead to pregnancy?

  • Reply 5 of 25

    Quote:

    Originally Posted by sr2012 View Post



    Pity about Samsung being dicks and charging Apple 20% more, apparently:

    http://www.dailytech.com/Report+Samsung+Now+Charging+Apple+20+More+for+iPhone+Processors/article29166.htm




    That dick seems to have Apple by the balls...

  • Reply 6 of 25
    mjtomlinmjtomlin Posts: 1,904member

    Quote:

    Originally Posted by sr2012 View Post



    Pity about Samsung being dicks and charging Apple 20% more, apparently:

    http://www.dailytech.com/Report+Samsung+Now+Charging+Apple+20+More+for+iPhone+Processors/article29166.htm


     


    That has been denied by Samsung officials: http://bgr.com/2012/11/14/apple-samsung-chip-price-hike-denial/

  • Reply 7 of 25
    irelandireland Posts: 17,645member
    Every time there's good news AAPL goes down.
  • Reply 8 of 25
    I don't understand that either. The china approval of the iPhone 5 should have had a significant upswing too. I've come to believe the whole stock market is manipulated by a few key investment banks.
  • Reply 9 of 25

    Quote:

    Originally Posted by sr2012 View Post



    Pity about Samsung being dicks and charging Apple 20% more, apparently:

    http://www.dailytech.com/Report+Samsung+Now+Charging+Apple+20+More+for+iPhone+Processors/article29166.htm




    Not only is that old, it is also false.

  • Reply 10 of 25

    Quote:

    Originally Posted by phippster View Post



    I don't understand that either. The china approval of the iPhone 5 should have had a significant upswing too. I've come to believe the whole stock market is manipulated by a few key investment banks.




    That's a common belief but it cannot be further from the truth. A few stocks, for a short period of time? Sure. But the whole stock market? All the time? Only those who don't under market dynamics would believe that.


     


    Having said that, it only takes a few well-financed individuals (as in individual investors or institutions) to manipulate certain stocks for a short period of time to create havoc on a particular stock, a whole sector and even the market as a whole, such that it would take time to recover from it. But recover it will.

  • Reply 11 of 25
    quinneyquinney Posts: 2,526member
    phippster wrote: »
    I don't understand that either. The china approval of the iPhone 5 should have had a significant upswing too. I've come to believe the whole stock market is manipulated by a few key investment banks.

    Hint: be like the birds

    400
  • Reply 12 of 25

    Quote:

    Originally Posted by ankleskater View Post




    Not only is that old, it is also false.





    Until next year.

  • Reply 13 of 25

    Quote:

    Originally Posted by island hermit View Post




    Until next year.





    Good point - it will be a new rumor again next year. ;-)

  • Reply 14 of 25

    Quote:

    Originally Posted by island hermit View Post




    Until next year.



     


    Not necessarily. We don't know the terms of the current contract. It might not run out for five more years. And it might be written in such a way that Samsung can't change the pricing just cause. 


     


    The 'truth' in the story could be that yes the contract is running out and yes perhaps Samsung did attempt to get 20% more for the chips they are producing, to offset that they aren't getting all the orders. But it doesn't mean that they tried to force it or that Apple agreed to the pricing. It was just where Samsung started negotiating. 

  • Reply 15 of 25

    Quote:

    Originally Posted by quinney View Post





    Hint: be like the birds





    As opposed to being like the horny one?

  • Reply 16 of 25

    Quote:

    Originally Posted by island hermit View Post




    Until next year.



     


    Quote:

    Originally Posted by charlituna View Post


     


    Not necessarily. We don't know the terms of the current contract. It might not run out for five more years. And it might be written in such a way that Samsung can't change the pricing just cause. 


     


    The 'truth' in the story could be that yes the contract is running out and yes perhaps Samsung did attempt to get 20% more for the chips they are producing, to offset that they aren't getting all the orders. But it doesn't mean that they tried to force it or that Apple agreed to the pricing. It was just where Samsung started negotiating. 





    I think Hermit is referring to the fact that the contract calls for pricing to be set at the beginning of each calendar year. Therefore, rumors of price increase in the fall were categorically false. But could Samsung feel smug enough to play hard ball in January?


     


    Of course, it may also be a false rumor that prices are set at the beginning of the each year.


     


    In fact, it might just be a rumor that Samsung is a supplier at all.

  • Reply 17 of 25
    sockrolidsockrolid Posts: 2,788member
    Re: "...Foxconn reportedly said the iPhone 5 was "the most difficult device" it has ever been tasked with building."

    Note to Jony Ive: "simplify."
  • Reply 18 of 25
    obamaobama Posts: 62member


    Having your product available to buy does make it more attractive to your customers.  


     


    Only fanboys buy products that cost more and have a one month wait time.  If you expect your products to sell to anyone else you have to make them available.  It's called good business.


     


    Gawd, I miss Steve and OSX.  Never be the same.

  • Reply 19 of 25
    mj1970mj1970 Posts: 9,002member

    Quote:

    Originally Posted by SockRolid View Post



    Re: "...Foxconn reportedly said the iPhone 5 was "the most difficult device" it has ever been tasked with building."

    Note to Jony Ive: "simplify."


     


    Actually it may not be an issue of not being simple.


     


    Hint: Simple/Complex and Easy/Hard are not necessarily the same axes.


     


    In fact, it might because of some particular simplification that it is harder to assemble. One example of this might be: No screws. Now screws might be "simpler" (i.e., fewer parts, visually cleaner and simpler) but may create difficulties in assembly (e.g., with use of glues and things snapping together, and aligning, etc.)


     


    My guess though is that with the ever thinner designs and tighter tolerances these things are pushing the boundaries on current manufacturing techniques. That's good though. Someone has to be the first. Once someone (like Apple) pushes hard to make the "impossible" possible, the knowledge and techniques and experience (and sometimes machinery too) is available for another round of products whether they are iPhones or something else completely.

  • Reply 20 of 25
    flaneurflaneur Posts: 4,511member
    mj1970 wrote: »
    Actually it may not be an issue of not being simple.

    Hint: Simple/Complex and Easy/Hard are not necessarily the same axes.

    In fact, it might because of some particular simplification that it is harder to assemble. One example of this might be: No screws. Now screws might be "simpler" (i.e., fewer parts, visually cleaner and simpler) but may create difficulties in assembly (e.g., with use of glues and things snapping together, and aligning, etc.)

    My guess though is that with the ever thinner designs and tighter tolerances these things are pushing the boundaries on current manufacturing techniques. That's good though. Someone has to be the first. Once someone (like Apple) pushes hard to make the "impossible" possible, the knowledge and techniques and experience (and sometimes machinery too) is available for another round of products whether they are iPhones or something else completely.

    Good observation. (I think you mean "No screws" the second time there by the way.) The tighter tolerances are certainly visible and feel-able, and lead to the impression, conscious or unconscious, that you are holding something new and unusual in your hands. Same with the matte and mirror finishes, which must be handled carefully during assembly, adding to the difficulty.

    Anyway, it's the deep simplicity of the Jobs/Ive aesthetic approach that leads to the difficulties. Is it worth it? Forty million-plus will vote yes this quarter. It's really all about the aesthetics when you get down to it.
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