Production problems may affect Apple’s 10th-anniversary phone

Bloomberg

As of early fall, it was clearer than ever that production problems meant Apple Inc. wouldn’t have enough iPhone Xs in time for the holidays. The challenge was how to make the sophisticated phone—with advanced features such as facial recognition—in large enough numbers.
As Wall Street analysts and fan blogs watched for signs that the company would stumble, Apple came up with a solution: It quietly told suppliers they could reduce the accuracy of the face-recognition technology to make it easier to manufacture, according to people familiar with the situation.
With the iPhone X set to debut on November 3, we’re about to find out whether the move has paid off. Some analysts say there may still be too few iPhone Xs to meet initial demand. Ming-Chi Kuo of KGI Securities predicts Apple will have two to three million handsets available on launch day and 25 million to 30 million units for the holiday quarter, down from his previous forecast of 40 million. For comparison, Apple sold 78 million phones during the same period last year, although that included all models.
Apple is famously demanding, leaning on suppliers and contract manufacturers to help it make technological leaps and retain a competitive edge. The company’s decision to downgrade the accuracy of its Face ID system—if only a little—shows how hard it’s becoming to create cutting-edge features that consumers are hungry to try. And while Apple has endured delays and supply constraints in the past, those typically have been restricted to certain iPhone colours or less important offerings like the Apple Watch.
This time the production hurdles affected a 10th-anniversary phone expected to generate much of the company’s revenue. Apple declined to comment.
About a month ago, Foxconn Technology Group pulled as many as 200 workers off an iPhone X production line.
Apple was struggling to get sufficient components for the phone and needed fewer people to put it together. The main culprit, the people said, was the 3-D sensor that recognises faces and unlocks the handset. Foxconn declined to comment.
To make matters worse, Apple lost one of its laser suppliers early on. Finisar Corp. failed to meet Apple’s specifications in time for the start of production, and now the Sunnyvale, California-based company is racing to meet the standards by the end of October. That left Apple reliant on fewer laser suppliers: Lumentum Holdings Inc. and II-VI Inc. It’s not clear how much the new specs will reduce the technology’s efficacy. The 3-D sensor shortage is expected to end in early 2018.