Analysts Raise Concerns over iPhone 5s Touch ID Sensor Supplies

| Apple Stock Watch

Touch ID, the built-in fingerprint technology in Apple's new iPhone 5s, is causing production problems and will limit availability on its September 20 launch day, according to analysts. Both Brian White from Cantor, and Peter Misek from Jefferies both say they're hearing the sensor yield is below expectations, limiting just how many iPhone 5s units Apple can build.

Apple's new iPhone 5s will be available in stores on September 20Apple's new iPhone 5s will be available in stores on September 20

Mr. White said the limited parts supply caused Apple to skip iPhone 5s preorders even though it began iPhone 5c preorders last week on September 13. He stated,

Given Apple's history of offering a pre-order period for past iPhones, and our understanding of the complexity around the new flagship feature (i.e., Touch ID) on the iPhone 5s, we believe iPhone 5s supply constraints may have played a role in the company forgoing the pre-order process with the iPhone 5s.

Mr. Misek backed up those concerns. "Our checks indicate that suppliers have started to receive build plan cuts," he said. "We think poor fingerprint sensor yields are the cause."

The iPhone 5s was introduced at an Apple media event last week along with the lower priced iPhone 5c. The iPhone 5s includes a 64-bit A7 processor, an 8 megapixel camera with improved sensor, Apple's new M7 motion and fitness tracking processor, and more. The iPhone 5 also introduced gold as a color option, replaced black with space gray, and kept the white model in its lineup.

The Touch ID sensor lives in the Home button on the front of the iPhone 5s. It lets users replace the traditional passcode with their thumbprint or fingerprint to access their apps and other data, and to authorize payments through the iTunes Store.

The iPhone 5s is priced at US$199 for the 16GB model, $299 for the 32GB version, and $399 for the 64GB model on a two-year contract. Off contract and unlocked, the 16GB model costs $649, the 32GB is priced at $749, and the 64GB model costs $849.

Despite his concerns about production issues, Mr. Misek is expecting Apple to sell 32 million iPhones during its fourth fiscal quarter, up from is earlier estimate of 30 million. Despite his quarterly optimism, Mr. Misek is lowering his target price for Apple's stock from $450 down to $425 and maintaining his "Hold" rating."

Mr. White is a little more positive with his "Buy" rating and $777 target price. Apple is currently trading at $454.14, down 10.76 (2.31%).

[Thanks to Barrons for the heads up]

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Comments

Bosco (Brad Hutchings)

They could offer a iPhone 5s Pro with a pre-broken fingerprint scanner. If I still bought iPhones, I would totally pay an extra $50 for that.

mrmwebmax

+

While Im sure they’ll get the production problems ironed out, Im wondering what they’re going to do about a iPhone naming conundrum perhaps worse than when OS X ran out of big cats.

The “s” designation, as in 4s and 5s, usually denoted an iterative update in the iPhone as opposed to a more radical redesign—think 3 to 4 to 5. Now, though, it seems to be serving two purposes: denoting an iterative design and differentiating the premium 5s from the plastic 5c.

So what happens this time next year? Do they come out with a 6 and a 6c? If so, what happens the year after that, if they release an iterative 6s? What does the iterative c get called then? The 6cs?

If they continue to release major and iterative versions of the premium and plastic models, its going to be very interesting to see how they name the models moving forward.

ibuck

What? Apple can sell millions of iPhones 5S in the first few hours?

Downgrade AAPL stock to $425 ! The company is doomed! [/sarcasm]

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