Friday, November 09, 2012

Foxconn Chairman admits iPhone 5 hard to build; supply issues continue as Apple stock continues to plummet

It's been said before, but by an unnamed executive: the iPhone 5 is hard to build. Anonymity is gone now, and the report is confirmed: on Wednesday, Foxconn Chairman Terry Gou told reporters the same thing.

He said, "It's not easy to make the iPhones. We are falling short of meeting the huge demand."

That statement, while newly made, could point to bad things for owners of Apple stock. Apple stock is down 20 percent from its Sept. 21 intraday high of $705.07. On Thursday morning, the stock was down another $10.47, after falling about $20 the day prior.

Granted, the Wednesday drop was part of an overall stock market plunge. Some attributed that drop to the European fiscal crisis, the "fiscal cliff," and fears that capital gains taxes will increase during President Barack Obama's second term.

However, the stock might drop further now that Gou has made his statement.

Before the release of the iPhone 5 was released, analysts were talking about a huge holiday quarter for Apple (October to December is Apple's fiscal Q1 2013). However, Apple has struggled to meet iPhone 5 demand, and estimates have been dropping, with key Piper Jaffray analyst Gene Munster cutting his iPhone forecast by 4 million devices. `

In the earlier report, the unnamed Foxconn executive said, “The iPhone 5 is the most difficult device that Foxconn has ever assembled. To make it light and thin, the design is very complicated. It takes time to learn how to make this new device. Practice makes perfect. Our productivity has been improving day by day.”

Gou's assertion makes it seem that productivity still isn't where it needs to be.

While Apple recently introduced the iPad mini and the iPad 4, it's clear that Apple is the "iPhone" company, with that being the product that brings in the most revenue.  How its current quarter turns out will depend on iPhone 5 supply, and Foxconn's ability to produce it.


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