One of the reasons Apple’s supply of iPhone 5 devices couldn’t meet the opening weekend demand may be due to its decision to use thinner touchscreens vs. previous generations, which combine touch sensor and glass together in one. The tech in question is coming from just two suppliers at the moment, LG Display and Japan Display, and according to some, that’s leading to a shortfall in production numbers.
Barclays analyst Ben Reitzes said in a research note (via Bloomberg) on Monday that the supply issue could be helped by adding Sharp to the list of suppliers for the in-cell displays, but that the Japanese LCD supplier is having trouble getting production quality to where it should be in terms of reducing defects in new screens. Sharp was unable to begin shipping the screens ahead of the iPhone 5’s debut, Barclays claims.
IHS senior analyst Tom Dinges also told Bloomberg that supply constraints were a likely source of problems for Apple during opening weekend, but noted that that’s a very good problem to have. And Barclays anticipates that it will get better, with estimates of iPhone sales around 45.2 million for the December quarter, and 170.7 million for the iPhone 5’s first year on the market.
There’s also reason to believe that supply constraints could actually be a boon to Apple’s long-term financial performance. Analyst Rob Chira noted before the iPhone 5’s release this month that Apple’s stock has actually performed 2.2 times better in a quarter after official word of supply constraint has come from the company itself. That’s exactly what Apple did on Monday in its press release, with CEO Tim Cook providing a statement saying the company is working hard to meet demand but faces challenges in doing so. Chira saw the in-cell displays, as well as Qualcomm’s 28-nanometer baseband chip as potential weak areas in terms of supply volume, and Qualcomm has said that supplies of that part could be limited as it introduces new manufacturing processes.
So far, Apple’s stock is down, sitting at around $687 in aftermarket trading this morning ahead of the bell. But it could rebound easily once analysts get over the fact that opening weekend sales didn’t meet a lot of analyst expectations, and imagine what kind of numbers Apple can put up once it gets past initial supply constraint issues. We’ve reached out to Apple for more on what’s keeping initial supply of devices under demand, and will update if we hear back.
Update: Apple got back to us and said they had “nothing to add” to yesterday’s official press release when it comes to iPhone 5 supply constraints.