There have been reports that Apple’s iPhone X had component yield and manufacturing issues surrounding Face ID, which led to concerns that its supply will be extremely limited. One of them was that that Apple had lowered the specs for the Face ID components but Apple released a statement through CNBC saying “The quality and accuracy of Face ID haven’t changed. It continues to be 1 in a million probability of a random person unlocking your iPhone with Face ID. Bloomberg’s claim that Apple has reduced the accuracy spec for Face ID is completely false and we expect Face ID to be the new gold standard for facial authentication.” I believe there are at least two reasons that the X’s launch will not be a "catastrophe.” (Note that I own Apple shares and have sold Call options).
The iPhone X’s lead-time of 5 to 6 weeks (which is longer than any other iPhone lead-times) occurred just over an hour after pre-orders were taken this past Friday night/Saturday morning is probably due to a combination of high demand which Apple stated was “off the charts” via a report through CNBC and Apple’s suppliers not being able to build enough to satisfy the initial demand. A long lead-time is not unexpected since the X is a major change to the iPhone and not necessarily an indication of manufacturing issues.
Keep in mind that any launch of a high demand product should not have enough on hand to get to supply/demand balance at day 1 and in fact that would be a poor management choice if it was. Between not knowing how many to build (especially if there are multiple models and versions) and the cost of the first wave of products being higher than ones built later a company such as Apple should never try and be in balance at first availability.
Number of countries and early delivery
The first reason I believe that the iPhone X will not be a catastrophe for Apple is the number of countries that it will be available in on Friday. When Apple announced the iPhone X on September 12 it said it would be available in 57 countries compared to only 10 for the iPhone 6 and 6 Plus and 29 for the iPhone 7 and 7 Plus. I believe this shows management had a good read that the X’s production would be strong enough to handle a rollout to many more countries than it normally does at first availability.
While it is a limited data point the second reason is that a friend of mine who ordered two iPhone X’s and initially had a 2 to 3 week delivery timeframe has received information from FedEx that his iPhones are in transit to the warehouse and are now scheduled to be delivered as a first day shipment of this Friday, November 3. Maybe he has gotten lucky and that this won’t be the normal situation but Apple has a history of under-promising and over-delivering iPhones (meaning shipping sooner).
I won’t count it as a reason but there have been a number of reports that the iPhone X’s manufacturing ramp has really geared up. While again its lead-times could stay extended for a few months if there is any company that can scale manufacturing it is Apple.
