A Bloomberg piece this week started off with a stark allegation: “Apple Inc. has lost its supply chain mojo.” Few watching the industry could say anything to disagree. As consumers and consumer press discuss the newest features and offerings of each iPhone rollout, a corollary conversation begins around how hard the product is to get (if it can be gotten at all). That points to a supply chain problem. The same is true for the iPhone X, a product that was supposed to make a splash to celebrate a decade since the smart phone was introduced.
Historically, Apple has been called a supply chain superstar. Market research firm Gartner in its annual ranking of Supply Chain Top 25 listed Apple as one of its three Supply Chain Masters, which, Gartner sais have earned “composite score that place them in the top 5 rankings for at least 7 out of the past ten years.” Apple was in the top five every year for the past decade. The analyst said:
Apple continues to improve and innovate both its solutions and the means of producing them. For instance, the company sees manufacturing equipment design and capabilities as a competitive differentiator, even as the actual production is done by manufacturing partners. In this way, the tech leader takes a very strategic approach to what it will directly own versus exerting control over the ecosystem of partners in delivering its solutions to market. This ownership extends to the design of the processing and graphics chips that form the brains for its devices.
In recent years, though, Apple’s strategy has shown a potential weak spot. In the past, it has been able to bring millions of iPhones to market, but more recently, supplier hiccups have cost the OEM time and money, and left consumers lining up in front of Apple Stores in hopes of bagging an elusive newest model iPhone.
Apple has said that users can pre-order the newest iPhone on Friday, October 27 at 12:01 a.m. PDT. Further, Apple promised:
iPhone X will be available in more than 55 countries and territories, and in Apple Stores beginning Friday, November 3 at 8:00 a.m. local time. Stores will have iPhone X available for walk-in customers, who are encouraged to arrive early.
That seems like a big promise, especially considering the launches surrounding the iPhone 7 and 8, and the word on the street. Forbes reported: “While iOS 11 continues to cause serious problems, supply chain leaks have revealed iPhone X supply is severely delayed and interest is so low in the iPhone 8 and iPhone 8 Plus production is being cut by 50% after less than a month.”
Industry watchers estimate that iPhone X shipments will total around 20 million units in the last couple of months of the year, creating a real possibility that holiday shoppers may have to turn to competing smart phone if they want to have a timely gift to give, according to Nikkei Asian Review .
Perhaps more concerning is that Apple may be sacrificing the product quality and historical quest for unbeatable user experience to close its supply chain gap. “[Apple] quietly told suppliers they could reduce the accuracy of the face-recognition technology to make it easier to manufacture,” Bloomberg reported. While the result may be something more exciting than the fingerprint technology used in current iPhones, it may be that leapfrogging to newer cutting edge technologies is getting to be more than Apple’s supply chain, from contract manufacturers to component makers, can reasonably deliver.
The question is whether users are going to be willing to pay the high price tag of the iPhone X for anything than less than stellar technology. It is telling that Steve Wozniak, Apple co-founder, is taking a wait and see approach. “I'd rather wait and watch that one. I'm happy with my iPhone 8 — which is the same as the iPhone 7, which is the same as the iPhone 6, to me,” Wozniak said to attendees at the Money 20/20 conference. “For some reason, the iPhone X is going to be the first iPhone I didn't — on day one — upgrade to. But my wife will, so I'll be close enough to see it.”
Clearly, it’s going to be interesting times for the industry giant Apple. Will the company overcome it’s supply chain woes? Time will tell.