Can Apple Solve This iPhone 5 Problem Quickly?

Apple (NASDAQ:AAPL) shares took a sudden dip this week after the company reported lower-than-expected figures for iPhone 5 sales and analysts are worried that possible component supply problems were to blame for the unmet demand. On Tuesday, the company’s stock closed 2.5 percent down at $673.54 after having crossed $700 just a week ago. Wednesday, shares continued lower 1.24% on lower-than-average volume at $667.77. Today, shares are bouncing almost 2% at $678 per share as of 1:52 pm EST.

Apple announced it had sold 5 million iPhone 5 units over the first three days of the device being available in stores, but most analysts had predicted much higher numbers than that. Macquarie Securities’ Kevin Smithen said in a note to investors that he had revised his estimates for iPhone activations to 3.2 million from 4 million for the quarter.

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Most analysts have identified the new screen on the iPhone 5 as the main reason for the shortfall. Apple has included an in-cell touch panel in the display of the new device, which basically incorporates the touch sensors and liquid crystals into the same layer and results in thinner LCD screens and ultimately a thinner phone. The iPhone 5 is 18 percent thinner than its predecessor at 7.6 millimeters. However, the innovation makes the manufacturing process a little more complex and it appears all of Apple’s chosen suppliers for the part have not been able to meet the surging demand quickly enough. Japan DisplayLG Display (NYSE:LPL), and Sharp were the three suppliers chosen by Apple to manufacture the displays.

“Every time there’s a new technology, there’s a bit of a learning curve before you can ramp production,” Sterne Agee analyst Shaw Wu told Investor’s Business Daily. “There’s a bunch of new components here.”

Apple has also included a brand new baseband chip in the phone to allow for 4G LTE wireless access, and it appears that the Qualcomm (NASDAQ:QCOM) product has also caused some supply worries. “It’s a combination of these new components that’s causing the supply constraints,” Wu added.

Kyle Wiens, the chief executive of iFixit, a site that publishes guides for users to fix their own gadgets said Apple may not be able to fill all pre-orders until October, but is sure the company will put supply back on track for the next quarter.

Wu does not share the disappointment of Apple investors either. “In the big picture, it doesn’t really matter how many they sell in a few days,” the analyst said. “It matters what they sell over the next two quarters.”

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