While tech geeks may be bummed that Apple didn't introduce a new hardware product at last week's developers' conference, some in the electronics supply chain are still scratching their heads wondering how the company's iPhone 5 forecast is holding up.
News from the conference focused on the iTunes Radio service and the iOS7 unveil and got the iPhone 6 rumor mill spinning again, but other reports raised some supply chain issues worth watching.
A couple issues causing minor headaches could be linked to higher-than-needed order targets and iPhone 5 production delays. Much of the head-scratching appears linked to Citi analyst Glen Yeung's recent research note, citing Citi's "field work in the hardware supply chain," a report major news outlets around the world picked up.
Take this report in International Business Times, citing Yeung, for instance. The analyst believes Apple is forecasting an 80 to 85 million iPhone production run (a combined number for a mix of iPhones including iPhone 5, iPhone 5S, low-cost iPhone, iPhone 4S) during the second half of the 2013 calendar year.
But, as IBT reports, Yeung also thinks Apple won't hit this number. Pointing to discussions with suppliers throughout the electronics supply chain, there's evidence that the number will be closer to 65 to 75 million units, and Citi is forecasting 68 million, the paper reports.
As quoted by IBT, Yeung says, the skepticism is due to "ongoing iPhone production order cuts through June (because of higher-than-expected 1H13 iPhone inventory), Apple's typical pattern of setting a higher-than-needed order target, and a modest delay in iPhone 5S production" of about two to four weeks probably related to display issues.
A DigiTimes story published this week lends some credence. Citing unnamed sources, the paper says cover glass makers and backlighting module makers are expected "to see their shipments decline by as much as 60 percent in the second quarter of the year as Apple readjusts its reserves but are later expected to bounce back in the following quarter when Apple prepares to launch new iMac products."
Sure, we could dismiss this as one guy's take on the situation, and his take happens to be bearish one. There are plenty of other analysts who are more upbeat in their predictions.
Frankly, though, it's not about whether or not an analyst is right. It's whether or not the supply chain -- and all the planning that goes into it -- is working right.
The more interesting issue is the repeating nightmare that haunts the electronics supply chain. Doesn't this statement -- "Apple's typical pattern of setting a higher-than-needed order target" -- set off bells and whistles?
It's the cat-and-mouse supply chain game that forces suppliers to figure out which forecast and order projections are right, to place a bet on many parts will actually be needed by top-tier customers (who also have no good way of accurately forecasting demand), and to plan an appropriate supply chain.
The difference between 65 and 85 million devices is a pretty significant number. And, that's just a bet being placed on one company's projections. The complexity gets worse when you multiple it across the entire supply chain.