There is little doubt that one of the most talked about companies on earth is that of Apple, and that includes any and all morsels of information that originate anywhere across its supply chain. Take it from us, if you set-up the right electronic alerts, your inbox can be inundated with all sorts of Apple-related supply chain news.
In the past, a good portion of the information leaks and/or reports originated from Asia based Internet or equity analyst sources where the bulk of Apple’s supply network originates. Lately however, traditional business media, in particular, the Wall Street Journal, has been publishing news that is based from information garnered from Apple’s suppliers. While this news is not entirely new or different, it provides legitimacy to the equity investment community of what the company is planning. We believe it is also a means for Apple’s savvy marketing teams to orchestrate that “buzz” that precedes major product launch milestones. Not to be undone, arch rival Samsung is also upping its game in consumer marketing and creating market buzz.
Today’s edition of the WSJ features a report that cites supplier ship plans indicating that Apple has authorized contract manufacturer Foxconn and its parent Hon Hai Precision Industry Corp., to begin shipping two different models of the anticipated new models of iPhones as the company attempts to regain momentum in the smartphone market. The timing is geared for the very important upcoming holiday buying season. There is validation that the supply chain across Asia started mass-producing the new iPhone components in June, including plans to build both a high-end and lower-cost model.
Apple has scheduled an event on September 10 and half the planet has already assumed that this will be the unveiling of these new models. The WSJ cautions that it is not clear whether Apple will launch both phones on the early September date.
The WSJ validates what Supply Chain Matters and other social media has long speculated that the lower-cost iPhone model is targeted to boost Apple’s sales in emerging markets. We believe that Apple may discover that customers in developed markets in areas such as Europe and the U.S. will also find the lower-cost version a more attractive option.
Build plans for both models vary, indicating the reality of a delicate balance for market timing, coupled with continual information leaks pointing to volume ramp-up challenges involving each model. In its article, the WSJ cites an analyst at Taiwan based KGI Securities as estimating that in calendar Q3, more than 5 million next-generation high-end iPhones, and over 8 million of the lower-cost model will ship. For Q4, KGI indicates ship plans for 28 million of the high-end version and 18.7 of the lower-cost version. Other information leaks we have viewed indicated that there have been production ramp-up issues involving a fingerprint sensor incorporated on the new high-model, while the lower-cost model is experiencing separate volume ramp-up challenges involving added contract manufacturer Pegatron. The new contract manufacturer is also under the looking glass of global labor groups for alleged reports of labor abuses involving its workforce. Apple’s supply chain teams are also dealing with both new component and production ramp-up process challenges for both versions of the iPad product line. New product launches are rumored to be occurring either late this year or early in 2014.
Supply Chain Matters is of the view that Apple is being careful to protect its overall margins, particularly given the upcoming holiday buying season.
Not to be undone, rival Samsung has responded by telegraphing a product announcement on September 4. Multiple unconfirmed business and social media reports speculate that Samsung will attempt to upstage by announcing the launch of an upscale combination smartphone and tablet, termed a “phablet”, as well as a Galaxy Gear electronic wristband smart watch that can make phone calls, play video games and send emails.
Various Internet sources indicate that Apple is still in the process of hiring heavy hitters in watch-based design and product marketing while ramping-up its termed “iWatch” product development team. The consumer electronics icon has quietly been acquiring innovative technology producers including the recent acquisition of Passif Semiconductor, a chip provider developing radios for low-power Bluetooth applications.
If Samsung does announce a new electronic wristband product in early September, than we all get to witness the classic first-to-market vs. most innovative product competition in this rather new consumer electronics segment.
What is clear is that the ongoing battle among Apple and Samsung in consumer electronics market and mind share continues to heart-up and the differentiators will again be the overall capabilities of each provider’s supply chain in new product ramp-up and process innovation will again prove to be key differentiators.
Disclosure: The author is a current investor in Apple stock.