Apple is yet to officially unveil its next-gen iPhone 7 and 7 Plus. But rumors coming out of the supply chain paint a gloomy picture of the new iPhone. Supply chain sources told the Nikkei Asian Review that both models of the new iPhone will face supply shortage during the first round of the rollout. Some Apple suppliers are still trying to fix low yield rates of their components.

iPhone 7
Image Credit: Apple Inc.

Apple suppliers trying to fix low yield rates

A lower yield means an increase in the cost of production of components or failure to produce in enough volume. Apple is expected to unveil the iPhone 7 and 7 Plus on September 7 and make the phones available in retail stores on September 23. Sources told Nikkei that Apple could have about 10 million fewer iPhones in the 2H2016 compared to the same period a year ago.

If the report is true, consumers may have to wait a little longer for the new iPhones. Nikkei is not the only one to report on the supply shortage of the upcoming iPhones. Yuanta Investment Consulting analyst Jeff Pu said in a research note dated August 23 that he had reduced his iPhone production forecast from 120 million units to 114 million units in the July-December period. It includes both new and older models.

Lower demand for iPhone 7 should worry Apple

Pu said the iPhone 7 and 7 Plus builds are expected to be 74 million units during the second half of the year, compared to 84 million units for the iPhone 6S a year ago. The decline in production is due to defects in the dual-camera module and waterproof speaker, which haven’t been resolved yet. But the biggest worry for Apple should be a lower demand rather than supply shortage.

The iPhone sales are already declining. Analysts believe that the lack of a new design for the iPhone 7 could lead to a further drop in consumer demand. Supply chain sources told Nikkei Asian Review that the total order for core processor chips is expected to drop by 15% compared to last year. A source at another major supplier told Nikkei that they had received orders for only 54 million units of components for the iPhone 7 and 7 Plus.