Apple’s supply of iPhone 5 units couldn’t hold up to the weekend demand, and what many analysts forecast as one of the reasons behind this demand, is the use of new thinner display.
Apple Inc. (NASDAQ:AAPL) is using a new display technology for the iPhone 5 that integrates the touchscreen into the display, making the device smaller, lighter, more responsive, and eventually cheaper.
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Apple Inc. (NASDAQ:AAPL) is using three major suppliers for the displays: LG, Sharp, and Japan Display. LG has had good yields, while Sharp has struggled, but has more recently achieved suitable yields.
Analysts from Jefferies raise CQ3 from 23M to 26M, assuming 8-10M iPhone 5 sales. According to the report, their checks indicate that the addition of Sony to the list of in-cell display suppliers (Sharp, LG, and Toshiba) to Apple Inc. (NASDAQ:AAPL) has alleviated what had been the main bottleneck, and helped offset bearish concerns that only 5M iPhone 5 handsets will be available in September. The 5M unit sales the first weekend were lower than their 8M estimate, which analysts believe was due to the reservation of 2-3M units for the second wave of international launches this Friday.
Supply Chain Bottlenecks Lessening
Toshiba, Sony, and Hitachi created Japan Display by merging their small and mid-sized display businesses. They have separate plants, but are under a common ownership structure. According to Jefferies, most sell-side checks have only looked at the ramp and yield at the Toshiba plant, and have underappreciated the ramp at the Sony plant.
Analysts from Jefferies believe the output from the Sony/Japan Display plant is a major reason why consensus is concerned about the number of iPhone 5 handsets available to ship in September.
iPad Mini Impact on iPad Estimates:
Analysts from Jefferies expect a launch in late October, and added 8M iPad minis with a $317 ASP to their CQ4 forecast (though they cut their iPad 2 & 3 estimate by 3M due to cannibalization).
Overall, Jefferies CQ4 iPad estimate increases from 20.7M to 26.0M, ASP falls from $506 to $452, and revenues rise by 12% vs. their prior estimate.
Apple TV Launch:
According to the report, Apple Inc. (NASDAQ:AAPL) has pushed the iTV launch to CQ1, due to the October iPad mini launch. Jefferies’ 10M estimate for CY13 is unchanged.
Apple Capex Ramping
Jefferies increases Apple ex-store capex estimates to $8.3B in 2012, $10.4B in 2013, and believe the 2014 capex could be near $15B. This new estimate for 2012 implies H2:12 capex will be +65% vs. H1:12 capex. They think that EMC will be a major beneficiary, due to Apple’s use of Isilon for iTunes.
The Apple Store Advantage
According to the report, what Jefferies believes is an underappreciated part of the Apple story, is the Apple Store. Specifically, they think the Genius Bar is unique to Apple’s stores, as it offers a knowledgeable and immediate “Help desk”. While the overall retail experience is phenomenal, the Genius Bar gives Apple Inc. (NASDAQ:AAPL) a significant competitive advantage, in their view. One of their analysts had an iPad issue that was resolved from start to finish by an engaging and very helpful “Genius”. The process took less than an hour from the moment I entered the store.