Analysts Raise Concerns over iPhone 5s Touch ID Sensor Supplies

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]