iPhone 5 component supply challenges could threaten Apple’s empire

“The bigger you become, the bigger the problems you face,” Jonny Evans writes for Computerworld. “History shows that every empire reaches a point at which its infrastructure begins to become stretched, after which it tends to shrink. Resource allocation is important, and it seems Apple may be facing a few problems in this.”

“Recent reports claimed Sharp has been delayed in delivering new displays for the iPhone 5. A report this morning once again speculates the deal between Sharp and Hon Hai/Foxconn has hit several hurdles, leaving the Japanese company with no choice except to mortgage all its domestic offices and factories in order to remain in business until that deal is done,” Evans writes. “Apple management have previously claimed each generation of iPhone sells approximately double the total amount of the previous generation. In the case of iPhone 5, this leaves the company attempting to source components for some 170 million devices in the next 12 months.”

Evans writes, “However, with a larger church of manufacturers chasing up similar components, Apple suppliers have options if they choose to find more lucrative deals. This is leading the company to widen its supply chain. These ideas are supported by Apple’s well-recorded struggles to replace Samsung at many levels of its component supply stream. That the company has so far been unable to completely replace its smartphone foe hints that there’s a finite limit to component availability.”

Read more in the full article here.

MacDailyNews Take: If Tim Cook is anything, he’s an operations genius. If component supplies are the issue, Apple has the perfect guy on the job.

40 Comments

    1. First off, Tim cannot build squat without Board approval and secondly, Apple could not keep any Plant running 12 months of the year on their own. Furthermore, you seem to think that Apple builds stuff? Apple specs and issues RFP’s for supplies and part of their RFP process includes a bidders’ ability and capacity to mass produce while maintaining a high standard of quality control.

      Apple knows the cycle they are in and so too do the shareholders and unwarranted risks is not part of the equation.

  1. Apple Inc. and Samsung Group just need to get along and the Empire continues to hold. If anyone thought for one minute that Sharp, LG, Japan display or others could match Samsung, they were fooling themselves.

    One more issue that Apple could face is quality or lack thereof with these other suppliers.

    So we are clear, Fanboys needs not get all hot and bothered as my point is not to defend Samsung. My point is as if Countries can use diplomacy to avoid wars then Samsung and Apple must be able to kiss and make up as well.

    1. How Korean of you… Samsung did the equivalent of breaking into your house, raping your wife and selling your daughters into slavery. Kissing and making up is not on the agenda here. Triple damages and a blanket ban on the SIII is more likely.

  2. “…Apple suppliers have options if they choose to find more lucrative deals.”
    Let’s think about that premise for just a second more than Evans did when he wrote it.
    Parts suppliers are all about volume. That’s part 1. Part 2 looks at “lucrative” — With Apple and Samsung being the only two players making any money in this game, what other companies are in a position to offer a deal that is “lucrative” — measuring both individual price and volume price.

    1. The other factor here is that parts suppliers know Apple isn’t introducing a new product only to cancel it after 3 months because no one is buying them (Microsoft Kin, HP tablets, etc.). Even if the price per part is slightly less under an Apple contract than a Motorola contract for example, the supplier knows Apple will consistently order more parts and likely will increase its orders, while Motorola will be more likely to cancel or reduce orders.

      Advantage: Apple.

  3. BS. Apple could simply buy Sharp if push came to shove and hoard all of the displays for its products.

    Cash is king, especially to component suppliers who desperately need it, and Apple has more of it than anyone else.

  4. Silly. Besides the MDN take being right on the money… Apple has quite a bit of that too.

    Apple can (and has in the past) make damn sure it’s supply chain has what it needs to get the job done. Making an investment, ordering & paying upfront, etc., all pocket change.

    1. MDN assumes that Tim will have dancing partners to negotiate with and unless there is a dollar to be made, dancing partners could be harder to find. Asian companies do not believe in simple make work projects. They too love profits.

      The biggest challenge will be quality and performance standards which is something Apple did not need to worry about with Samsung who provided upwards of 60% of Apple supply line components. Now they do need to worry. Can you imagine if the Sharp and LG displays end up failing and the impact that this would have on the iPhone brand?

      1. Firstly, Apple test. Secondly, nobody wants a thief as a business partner, and certainly not as a major supplier. Thirdly, there are many reasons to think that Apple will bring production home to the US – and is probably doing so as we speak: leaks in the supply channel; IP theft by suppliers; reliance on third parties for critical components; US public opinion; mountains of cash. For new products which have a steep build in volume Apple may have to rely on third parties. But for mature lines, Apple could easily bring production home. And they have to get rid of Samsung. Its just too dangerous to have them in the supply line – they could pull the plug at any time, and surely will sooner or later.

  5. If Cookiewuss is the prefect guy for the job, shouldn’t he have predicted this probability some time ago? Increasing iPhone sales, increasing iPhone competition for components, not enough suppliers, and while we’re at it, let’s sue the bejesus out of our biggest component supplier?

      1. They way you use “republican” as an insult just shows how immature you are. “Oh no! Someone has different political views than I do, they must be a moron because I know everything that is right!!!” Stop bring politics into this

        1. There’s no immaturity involved when you simply know he is in fact a republican via previous posts written by him. You talk too much, btw for not being signed in AND not being Thelo. (Glad you didn’t have an issue with me calling him a racist asshole, lol!)

    1. That has been my point all along. No one is suggesting that Apple should no be pissed at Samsung, but in the end they both contribute greatly to the Apple mystic and they need to bury the hatchet. Silly comments like Apple buying or building foundries, or buying Sharp etc… just add to the false sense of security Apple users have about Apple who is a for profit company and who would go broke if they built their own devices. Apple gets to negotiate economies of scale with suppliers who run plants all day long to supply EVERYONE. Apple is NOT Samsung Group and that is where this gets complicated. Apple Inc. needs good pricing on reliable components and that is all they need to stay the course. Apple Inc. will begin to suffer the day consumers stop buying every new gadget they release and this could start to happen post iPhone 5 and iPad mini. Short of the wildly enthusiastic Apple fans, will every iPhone 4S user simply ditch it for a tiny bit bigger screen and maybe a few other neat features or will they hang on and simply go with the free OS6 update?

      1. Pat and TM, I think you’re being simplistic where it suits your argument. Tim Cook said publicly that every iPhone introduction doubles the previous record, so clearly he knows what to expect and has been modeling and sourcing accordingly. There’s zero evidence to support a contention that Apple would go broke if it manufactured its own products. In fact, Samsung does quite well, and while I don’t think do everything end-to-end, they supply themselves an awful lot of components. Within that spectrum Apple could control more of its destiny and still be profitable. And, Apple does continue to offer iOS updates for free (so far, who knows in the future?) but that doesn’t mean everything the next OS release can do can be done on pre-existing hardware. So it’s not at all clear cut what consumers will choose with an upcoming OS and upcoming hardware. Except that Apple has always done this and the sales trend has always seen a doubling.

    2. @Thelonious… You assume this article is correct. It is in Forbes, so its highly likely to be incorrect – journalism standards at Forbes being what they are… Apple are the uber long-term planners. You can bet that Apple started looking at removing Samsung from their supply line when they first began discussions on Samsung’s appropriation of their IP. I am quite sure Apple is well on the way to eliminating Samsung altogether. We may even see evidence of this in the iPhone 5 release, and the new small iPad, assuming the rumours of this product are correct. Apple went in hard against Samsung – and they are doubling down on the recent verdict, asking for a quick ban. You don’t do that if your opponent has a hold of your testicles. We’ll see, but I would expect to see not much of Samsung in the iPhone 5, and no Samsung componentry at all in any Apple product within 12 months.

  6. Winter is coming and Apple is going to face challenges. The Mayan calendar is running out and Apple is going to face challenges. The US election looms and Apple is going to face challenges. Ice is cold and Apple is going to face challenges.

      1. Jeezus, you take the point from the sort of deluded fool who talks about the Mayan Calendar?
        I guess you still believe the earth’s flat and you have fairies at the bottom of your garden!

        1. Oh, I just realized who I was responding to. I will say it slower so you can get it.

          I g u e s s y o u m i s s e d t h e p o i n t . I t i s a l l a b u n c h o f b o l o g n a .

          ( T h o s e c o m m e n t s w e r e ‘ t o n g u e i n c h e e k ’ a n d m e a n t i n j e s t . )

          Did you get it this time?

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