Poor news curation at Bloomberg, CNBC, Reuters creating misleading iPhone supply chain pan...

Posted:
in iPhone edited November 2018
Several prominent news sources are again blowing a cloud of speculative rumor-mongering that claims Apple's iPhone sales are -- perhaps! -- in desperate straits. Revised revenue reports from just five firms--out of Apple's 200 primary suppliers--are at the core of these reports, so take a look at how flimsy these conclusions are.

2018 iPhone lineup
Apple's complex supply chain is producing a wider range of iPhones than ever

Low-hanging Supply Chain fruit is hard for large venues to pass up

Troubles at component producers in Apple's supply chain have once again been cited as evidence that iPhone demand must be weaker than expected. This was very wrong last year, and every year for at least the last five generations of iPhones.

In fact, it was five years ago that Benedict Evans tweeted, "after the past couple of years, people really ought to have learned that supply chain production volume rumours for iPhones are worthless."

This year, something new finally happened. Writing for CNBC, Sara Salinas wrote the piece "Apple analysts have a long history of misreading weak iPhone demand based on supplier rumors," which detailed the history of how analysts and journalists have been consistently wrong in trying to interpret data from Apple's supply chain.

"Stop me if you've heard this one before," Salinas wrote. "An Apple analyst cuts iPhone shipment estimates based on weak supplier guidance, sending the company's stock tumbling."


CNBC warned about supply chain rumors, then returned to spreading them


Just a few days later, Salinas relapsed, writing up those very same addictive clickbait rumors for CNBC. "Rumors of weak iPhone demand heat up as at least four Apple suppliers cut revenue forecasts," she wrote, as if she hadn't just warned a few days earlier that "Apple's network of suppliers is deep and complicated. One supplier cutting its outlook doesn't necessarily mean iPhone demand is downIf history is any guide, analysts and investors tend to get unnecessarily spooked over one-off iPhone supplier rumors."

Collaborating with Lauren Feiner of Reuters, Salinas compiled a Wikipedia-like listing of specific suppliers who had all cut their forecasts: AMS AG, Qorvo, Lumentum, and Japan Display.

Take a look at the Suppliers

Two writers from Bengaluru for Reuters had previously outlined about $75 million in reduced revenue expected by Lumentum, which builds the vertical cavity surface emitting laser (VCSEL) used in iPhone X's TrueDepth Face ID system, and postulated that this was connected to profit warnings from IQE, which builds silicon wafers for Lumentum.

Vibhuti Sharma, another Reuters writer from Bengaluru, also referenced a less defined problem of "lower demand from smartphone makers" from Japan Display, which makes the high-end LED screens used in iPhones.

Sharma also separately detailed for Reuters that RF chipbuilder Qorvo had cut its revenue forecast, citing "recent demand changes for flagship smartphones" from a major customer.

And Mark Gurman of Bloomberg detailed a roughly $100 million revenue shortfall at AMS AG, which produces ambient light sensors for iPhones.

"The bad news keeps piling up for Apple Inc. ahead of the crucial holiday season," Gurman stated, referencing those three other suppliers and noting that Apple is the "largest customer and biggest revenue driver for all four, according to data compiled by Bloomberg. Qorvo gets 36 percent of revenue from Apple, Lumentum generates 30 percent, AMS receives more than 20 percent and Japan Display gets 55 percent."

Bloomberg's data on these suppliers' dependence on Apple weaves its way into other reports about these firms, but none mention that this data is from 2017, not some real-time data that pertains to today's shipments of the latest iPhone models. Apple changes its suppliers regularly, and its reliance upon a specific supplier is not a simple constant.

Let's take a look at specifics, but first, consider how this all happened before.

Bloomberg oversimplified Apple's complex component supply chain in April

Today's stories surrounding these five iPhone suppliers may sound like solid reporting work. But to many, it also sounded like solid journalism when Bloomberg confidently announced earlier this year in April that slowing growth at Samsung's OLED-making Display Panel unit clearly meant that iPhone X was in big trouble, because Samsung was Apple's sole supplier for its displays.

That was just part of the "bad news for Apple" that Bloomberg was "piling up" earlier this year regarding iPhone X. It all turned out to be fantastically wrong. Samsung was indeed making iPhone X's OLED panels, but it was also supplying OLED screens for its own Galaxy S9, which Samsung itself admitted to have "lower than expected" sales even as Apple announced that iPhone X remained its top-selling phone, achieving quarter after quarter of strong iPhone sales in a weakening industry.


Samsung blamed poor performance of its IM unit on "lower than expected" sales of its Galaxy S9


Further, it wasn't just a matter of Bloomberg drawing the wrong conclusion from the facts at hand; Gurman's report actually avoided any mention of the fact that Samsung's display unit had also detailed that it was having problems in both LCD and OLED, and that it was due to intense competition from other suppliers, rather than due to cuts from customers like Apple.

Analysts, journalists, and bloggers didn't critically think about any of that, they merely repeated the story Bloomberg crafted-- one that avoided mention of facts that undermined its slanted narrative that was ultimately totally wrong.

Is Lumentum important to Apple?

So what about this week's supplier panic? Bloomberg data on the importance of Apple to these suppliers in 2017 (detailed above) may appear notable, but it doesn't mean those suppliers are all necessarily as important to Apple today.

Lumentum, the VCSEL maker that recent reports have cited as being so critical to Apple's Face ID products -- which now include all three of its new flagship iPhones as well as the new iPad Pro -- is not even listed in Apple's 2018 Supplier List, and neither is Lumentum's wafer supplier IQE.


VCSELs are a component of the TrueDepth sensor array used by Face ID


That may be related to the fact that Lumentum is only one of Apple's VCSEL suppliers. In fact, the firm