The most impressive aspect of the iPhone 5 might just be its supply chain -- which could be its most alarming aspect, as well.
Sure, there were improvements in the phone, but what I find most astonishing is that Apple Inc. (Nasdaq: AAPL) announced the new phone on Sept. 12, started shipping on Sept. 21, and by Sept. 24, had sold and shipped 5 million phones. That's 5 million in three days. Has anybody ever shipped that many end-user consumer electronics in 72 hours?
Rather than recognizing what may be the fastest-moving, most innovative supply chain in the industry, analysts are grumbling about the iPhone 5 launch. Even though 5 million represents 25 percent more first-weekend shipments than the iPhone 4S last year, some analysts expected Apple to ship a much higher volume, with estimates ranging from 6 million to 10 million. When Apple issued a press release on Sept. 24 announcing it had sold out of the iPhone 5, industry watchers sniffed that the company was not well prepared, especially since Tim Cook is a supply chain guy. Wall Street punished Apple's stock, driving it down from around $700 to about $671, as of October 3.
Meanwhile, Foxconn Electronics Inc. factory workers in China were rioting, at least partially because of the enormous amount of overtime they were being asked to work to meet the demand for the iPhone 5. The riots made the comments from analysts seem petty and insensitive.
Apple may have one of the most innovative supply chains in the world, but when it comes to the hand-assembly work that's still required, humans may have reached their limit.
Although it didn't seem too sure, The Wall Street Journal reported that this event "appeared to be the first time Apple said it had entirely sold out of initial supplies of a new iPhone," which "raised questions about why the company hadn't been able to supply more of the new model."
Gee, maybe its workers just got too tired?
Analysts speculated that another possibility for the sell-out was the shortage of some components. One likely culprit, according to a report from Bloomberg, was the new thin display, which combines the glass and touch sensor into a single part. Even though Apple had brought on a third supplier, Sharp -- in addition to LG Display Co. and Japan Display Inc. -- Sharp was still working to reduce defects and was unable to start shipments of the display.
The Bloomberg report also wondered if another problematic component could be the new LTE (long-term evolution) baseband chip for the new 4G wireless networks. Qualcomm Inc. (Nasdaq: QCOM) said supplies of those chips were constrained as it ramps up a new manufacturing process.
In both of these cases, the parts in question are newly-designed. Given that fact, I find it just short of miraculous that Apple was able to ship so many phones so fast with no major problems. At least not yet.
What's more, this is the first iPhone that Apple released to multiple major markets around the world, not just in the United States. According to a press release issued by the company on Sept. 24, at launch, the phone was available in Australia, Canada, France, Germany, Hong Kong, Japan, Singapore, and the UK. On September 28, it was available in 22 more countries, and will be available in more than 100 countries by the end of the year. Think of how complex those logistics must be, particularly because different geographic markets have different technology requirements for 4G LTE band frequencies, not to mention varying regulations.
The spoiled-brat reaction of Wall Street to the iPhone 5 launch is way off base, in my opinion. We not only need more realistic expectations of how quickly any company can manufacture and deliver a cutting-edge product, but must also pay attention to the most important elements of a company's supply chain -- its human workers.