Apple Inc. went from being one of the most admired, to the most mocked companies, with in a span of a few weeks. Many users complained that the new iPhone 5 with Apple Maps has many bugs and glitches. However, the latest report from Steerne Agee, Shaw Wu states that iPhone 5 production has not had any impact from ‘Mapgate’, and sales should continue to be strong in the coming few months. Below is a summary of Shaw’s notes on the topic.
Improving Yields and Component Availability
The new iPhone 5 represents a new design with several new key components including: (1) in-cell touchscreen that enables a thinner and lighter design; (2) baseband that incorporates 4G LTE wireless capability into a 28 nm fabrication process so it is power efficient; and (3) aluminum and glass casing. While all of these could and were bottlenecks to production at some point, yields have been improving.
Bottleneck Appears to be Production Itself
From Steerne Agee’s latest supply chain checks, the gating factor has now apparently become the assembly of the iPhone 5 itself. From Shaw’s understanding, the product is not easy to build being a minimalist design using only aluminum and glass in its casing. Apple Inc. (NASDAQ:AAPL) has very high standards where it aims to produce each model to be an exact replica where variance is measured in microns. At this point, Shaw remains comfortable with his forecasts looking for 27 million iPhones in the September quarter and 46.5 million units in the December quarter but believe there is room for upside.
On a related matter, they believe AAPL made the right decision in addressing its Maps-gate issue head-on, referring those who have problems to use third-party maps. At the end of the day, Apple Inc. (NASDAQ:AAPL)’s goal is to produce the best user experience possible and as a leading platform, third-party support is essential.
Maps Will Get Better
Because Apple Inc. (NASDAQ:AAPL) Maps is software based, Shaw has high confidence that it will become more powerful and refined as more mapping and user data is acquired. People forget that Google Inc (NASDAQ:GOOG) Maps started out inferior to Yahoo! Inc. (NASDAQ:YHOO) Maps and Mapquest. From our understanding, Apple Inc. (NASDAQ:AAPL) had no choice but to produce its own Maps as Google Inc (NASDAQ:GOOG) wanted to keep turn-by-turn navigation unique to Android. He sees this as short-term pain for longer-term gain.
Disclosure: No position