Despite record output, Foxconn unable to keep up with massive iPhone 6 demand

Posted:
in iPhone edited September 2014
As preorders for the iPhone 6 and iPhone 6 Plus continue to pour in to the Online Apple Store, partner manufacturer Foxconn is reportedly having trouble keeping up with incredibly high demand despite reaching record output levels.



According to sources familiar with the supplier's operations, Foxconn has 100 dedicated assembly lines in Zhengzhou working around the clock in an attempt to meet preorders and launch day allotments for Apple's iPhone 6 handsets, reports The Wall Street Journal.

"We have been churning out 140,000 iPhone 6 Plus and 400,000 iPhone 6 every day, the highest daily output ever, but the volume is still not enough to meet the preorders," the unnamed source said. "For iPhone 6 Plus, we are still ramping up the production line. Another reason for the limited supply is the shortage of 5.5-inch displays."

One insider said 5.5-inch display yields are somewhere between 50 to 60 percent, meaning nearly half of all produced panels are scrapped as they do not meet Apple's strict standards. Retina HD displays bound for the 4.7-inch iPhone 6 are faring better with an output rate of about 85 percent.

Sources said Foxconn is responsible for manufacturing all iPhone 6 Plus models, as well as a "majority" of iPhone 6 versions. The report contrasts rumors from August that claimed Pegatron had won 50 percent of iPhone 6 orders, which at the time was said to be some 50 million units.

Reports from as late as July claimed Apple's larger 5.5-inch iPhone would not be ready in time to launch with the 4.7-inch iPhone 6, though Apple has put those rumors to bed and will debut both smartphones this Friday. Supplies for the "phablet" device appear to be constrained, however, as the larger phone was first to see delivery dates slip when preorders went live last Friday.

The stage is set for a record-breaking launch this week, as Apple on Monday announced combined iPhone 6 and 6 Plus preorders exceeded four million units within their first 24 hours of availability.
«134

Comments

  • Reply 1 of 66
    "Reports from as late as July claimed Apple's larger 5.5-inch iPhone would not be ready in time to launch with the 4.7-inch iPhone 6, though Apple has put those rumors to bed and will debut both smartphones this Friday. "

    Yes, once again, Apple has "put to bed" the lies propagated by Apple Shorts. When will they lern?
  • Reply 2 of 66
    Ah, Foxconn is only producing 16 million a month right now?
  • Reply 3 of 66
    Quote:

    Originally Posted by Cintos View Post



    "Reports from as late as July claimed Apple's larger 5.5-inch iPhone would not be ready in time to launch with the 4.7-inch iPhone 6, though Apple has put those rumors to bed and will debut both smartphones this Friday. "



    Yes, once again, Apple has "put to bed" the lies propagated by Apple Shorts. When will they lern?

     

    Frankly thought given the report dated back to July it is entirely possible that back then the yields were even lower and a launch was indeed looking at risk.. 

  • Reply 4 of 66

    it is because Foxconn is making more phones for Apple's more profitable rival Samsung.

  • Reply 5 of 66
    radarthekatradarthekat Posts: 3,114moderator
    So that's 540k iPhone 6/6+ models per day coming from Foxconn, maybe some more 6 models coming from Pegatron, plus however many 5S and 5C models are being manufactured (or were manufactured earlier this summer and stockpiled) to meet ongoing daily demand for those models, plus some 4S units still being sold in markets that won't get the 6 models until later this year and in markets, like India, where it will continue to be sold indefinitely, and we might arrive at somewhere around 750-850k total iPhones per day range. That's without China sales. 750k iPhones manufactured and sold per day, if demand holds up through the end of the year, would imply about 68 million total iPhones, across all models, sold in the Oct-Dec quarter. Not a bad showing. Especially when you consider Apple has made moves to increase the ASP, such as the bump to 64GB for $100 extra versus only to 32GB. That will pull a significant percentage up into the higher storage purchase. I know for me that's a no brainer.
  • Reply 6 of 66
    Quote:

    Originally Posted by wdowell View Post

     

     

    Frankly thought given the report dated back to July it is entirely possible that back then the yields were even lower and a launch was indeed looking at risk.. 


    This.

     

    Rumors should always be taken with a grain of salt, but when production is equaling almost 3:1 for 6:6+, it's very likely they considered holding release an extra few weeks to have more on hand. 

  • Reply 7 of 66
    MarvinMarvin Posts: 14,228moderator
    red oak wrote: »
    Ah, Foxconn is only producing 16 million a month right now?

    If they are still ramping up then the monthly total might end up being higher but with these numbers, they'd only manage 50m for a full quarter, which is around the same as Apple's highest ever iPhone quarterly sales.

    The ratio is interesting as the 6+ is around 1/3 the 6 so that gives an idea of their expected demand for each, even though the 6+ output is increasing. I expect the 6+ to get a lot higher volume initially than its sustained volume because the few who have been waiting for it will jump on it immediately but once they have that model, it'll fall off sharply while the 6 sustains its sales volume throughout the year. Apple of course won't break down the numbers, they'll lump all 4 models together.
    sog35 wrote:
    I don't understand why Apple does not start manufactering earlier.

    There was a mention of the quality testing on the initial run. If they started production 3 months in advance to build up a supply of 50m phones, they might have built 50m defective phones. If they spot any major issues in the initial say 10m unit run then it's far less of an expense to fix. The 'out of stock' message also drives demand, which is why their competitors have claimed it's done on purpose but they just wish they had the same kind of demand. The truth comes out in their earnings and Apple always backs up the suggestions of overwhelming demand.
  • Reply 8 of 66
    Marvin wrote: »
    If they are still ramping up then the monthly total might end up being higher but with these numbers, they'd only manage 50m for a full quarter, which is around the same as Apple's highest ever iPhone quarterly sales.

    The ratio is interesting as the 6+ is around 1/3 the 6 so that gives an idea of their expected demand for each, even though the 6+ output is increasing. I expect the 6+ to get a lot higher volume initially than its sustained volume because the few who have been waiting for it will jump on it immediately but once they have that model, it'll fall off sharply while the 6 sustains its sales volume throughout the year. Apple of course won't break down the numbers, they'll lump all 4 models together.
    There was a mention of the quality testing on the initial run. If they started production 3 months in advance to build up a supply of 50m phones, they might have built 50m defective phones. If they spot any major issues in the initial say 10m unit run then it's far less of an expense to fix. The 'out of stock' message also drives demand, which is why their competitors have claimed it's done on purpose but they just wish they had the same kind of demand. The truth comes out in their earnings and Apple always backs up the suggestions of overwhelming demand.
    people said that about iPhone 5s and 5c. iPhone 5s turned out to be the bigger seller hands down. It was the same with the gold option.
  • Reply 9 of 66
    If it isn't "oh no, apple sales are declining" then it's "oh, no, apple can't produce enough phones to keep up with demand", tough crowd.
  • Reply 10 of 66
    sog35 wrote: »
    I don't understand why Apple does not start manufacturing earlier.
    It makes no business sense for any company to design a product and sit it on it for months, over the biggest selling season, while competitors continue to sell, and all the while pissing off customers who all have expectations set by rumors. Companies make things to sell them, not to sit in inventory on warehouse shelves.
  • Reply 11 of 66
    schlack wrote: »
    If it isn't "oh no, apple sales are declining" then it's "oh, no, apple can't produce enough phones to keep up with demand", tough crowd.

    One of these concerns is better than the other! :)
  • Reply 12 of 66
    boredumbboredumb Posts: 1,416member

    I'm a little curious about who is scrutinizing 140,000 or so screens a day and finding them wanting...

    how much of that can be automated, I wonder?  Seems like that might be a stricture in itself.

  • Reply 13 of 66
    Quote:

    Originally Posted by Marvin View Post



    The ratio is interesting as the 6+ is around 1/3 the 6 so that gives an idea of their expected demand for each, even though the 6+ output is increasing.

     

    It's hard to glean anything useful from those figures, isn't it? Is the ratio 1/3 because of difficult assembly and low screen yields, or because that (plus whatever increase they manage in the coming weeks) is all Apple expects to sell?

     

    Quote:
    Originally Posted by Marvin View Post



    Apple of course won't break down the numbers, they'll lump all 4 models together.

     

    Which is unfortunate only because that will lead to endless arguing here over whether the Plus is actually popular or not. It'll make the spats over the 5C look like a polite handshake.

  • Reply 14 of 66
    boredumbboredumb Posts: 1,416member
    Quote:

    Originally Posted by sog35 View Post

     

    I don't understand why Apple does not start manufactering earlier.

     

    The main reason not to start early is to avoid leaks.  But who cares at this point?  You can stop the leaks so why not start production 3 months ahead of launch? 


    I'd think the "main reason" would be to present the most advanced and polished product possible.

    Despite what they say about security, I don't really see the endless buzz hurting Apple… especially given the fever-pitch 

    resulting by the time the products arrive.  

    Not sure they'd make the 6 o'clock news so many nights around the release, otherwise.

  • Reply 15 of 66
    Quote:
    Originally Posted by sog35 View Post

     

    I don't understand why Apple does not start manufactering earlier.

     

    The main reason not to start early is to avoid leaks.  But who cares at this point?  You can stop the leaks so why not start production 3 months ahead of launch? 


     

    Because the manufacturing output is limited by the least available component at the time. It's no use beginning production 3 months ahead of launch if the company making the screen can only produce half of your daily output. Might as well stock inventory of the screen for 1 1/2 months and start production 1 1/2 months before launch.  You would have the same amount of phones built at launch.

  • Reply 16 of 66

    Apple always seems to be held back because of manufacturing capacity.

     

    Something that should concern analysts.

     

    If manufacturing is stuck at 60-65 million units per quarter then that's the limit to Apple's sales... for ever and ever... unless Cook can figure out this problem.

  • Reply 17 of 66
    MarvinMarvin Posts: 14,228moderator
    adonissmu wrote: »
    people said that about iPhone 5s and 5c. iPhone 5s turned out to be the bigger seller hands down. It was the same with the gold option.

    Nobody expected the 5c to sell more, people said few would buy the 5c because the 5s was only $100 more and the gold model looked great. Surveys before the iPhone 5s arrived showed demand at 10:1 for 5s vs 5c, the estimation of actual sales from sales/ad tracking was about 3:1.

    The surveys for demand of 6 vs 6+ have them both fairly even but phablets sell in fewer numbers across all manufacturers.

    Something to factor in will be popularity by region. Eastern countries seem to prefer larger phones more but also prefer cheaper phones so it's not clear how well an expensive, large phone will work out there.
    Which is unfortunate only because that will lead to endless arguing here over whether the Plus is actually popular or not. It'll make the spats over the 5C look like a polite handshake.

    Yeah that's gonna happen. Both models are selling out so the one thing we can be sure of is that the current output volume for both models is too low.
    If manufacturing is stuck at 60-65 million units per quarter then that's the limit to Apple's sales... for ever and ever... unless Cook can figure out this problem.

    It wouldn't necessarily mean sales would be any higher over the long-term if they ramped up faster though, they could dip down further in a future quarter. You'd have to assume that people who can't get one are buying something else instead. Not everyone feels the need to buy at launch as it depends on their contracts, disposable income, desire to upgrade and so on.
  • Reply 18 of 66
    Quote:

    Originally Posted by Marvin View Post



    It wouldn't necessarily mean sales would be any higher over the long-term if they ramped up faster though, they could dip down further in a future quarter. You'd have to assume that people who can't get one are buying something else instead. Not everyone feels the need to buy at launch as it depends on their contracts, disposable income, desire to upgrade and so on.

     

    That really doesn't have anything to do with what I was saying.

     

    If Apple is constrained because of manufacturing capacity then that's a known limit. Known limits are not viewed favorably in the investment world (well, nothing is, actually... but let's not make it worse).

  • Reply 19 of 66
    I wouldn't say Apple is constrained. Launch demand is a spike. Apple has the capacity to make every phone the market wants to buy over the entire year.
  • Reply 20 of 66
    Quote:

    Originally Posted by chabig View Post



    I wouldn't say Apple is constrained. Launch demand is a spike. Apple has the capacity to make every phone the market wants to buy over the entire year.

     

    So... you are saying that "if" Apple were to need 75 million per quarter, for 2 quarters, then they could be made... no problem?

Sign In or Register to comment.