An unstable hot air mass troubled the iOSphere this week, the sky blackened by contradictory rumors, sometimes in the same blog post.
There was even confusion over whether the words “4G iPhone 6” referred to the Next iPhone or the Current iPhone.
Also this week: the audacious made-before-your-very-eyes rumor that Apple is building its own overseas assembly plants; the supply chain is ahead of schedule and behind schedule so that means a June or perhaps later release date for iPhone 6; and Sharp is ramping up to mass produce iPhone 5S screens in June even though it dropped Apple as a customer in January.
You read it here second.
____________________“The curiously conflicting comments from the factories [of Apple’s OEM partners], which don’t line up with known sales figures and inventory availability, only make sense if Apple is quietly but broadly pulling its manufacturing orders from its longtime partners in favor of building its own factories.”
~ Will Stabley, StableyTimes.com, showing what can be accomplished when one pretends that comments and figures are based on facts instead of on rumors.
iPhone 6 “pops up in carrier system”
Yet another rumor that promises more than it delivers.
The headline at GottaBeMobile reads in full: “iPhone 6 Pops Up in Carrier System, But Far From Release.”
Which certainly implies that, you know, someone saw and identified an iPhone 6.
In fact, what allegedly “popped up” were the words “4G iPhone 6” on what was variously called (sometimes in the same online posting) an inventory list, a product list, a “till system,” a computer system, or perhaps all the above, of British mobile carrier Vodafone.
“A Vodafone employee reportedly snapped the photo of the computer system showing an entry for the “4G iPhone 6″ mixed in with what appear to be plans and other device listings,” explains Josh Smith.
The photo was originally published by Stuff.tv.
“Stuff has received a spy shot of a UK mobile operator's till system which lists '4G iPhone 6' on a product list,” the website announced. Here’s the current version of the spy shot, with some previously visible portions blurred out.
“The photo was snapped at a UK operator store and strongly suggests that Apple will be skipping the 5S moniker and jumping straight to the iPhone 6, meaning we could be in for some drastic changes from the Apple camp,” Stuff announces breathlessly. Because the iPhone 5S is just, in the phrase a la mode, a “spec bump” whereas the iPhone 6 will be a Huge Step Forward.
But by this time, GottaBeMobile’s Josh Smith is busily trying to convince readers of his post that actually there’s nothing to the rumor, because the term “iPhone 6” doesn’t refer to a new iPhone at all.
“The simpler explanation for the iPhone 6 showing up in Vodafone’s system is that this may be a listing for the [existing] iPhone 5,” he reveals. “The iPhone 5 is actually the sixth iPhone, so it could potentially carry the iPhone 6 name on an internal system that is never meant to see the light of day.”
But there’s no holding back Stuff.tv, which reaches escape velocity from the gravitational pull of Reason in just a few sentences.
“[W]e could see a totally revamped body which strays away from the iPhone 4S and iPhone 5's well-established shape,” according to Stuff. “With Apple's WWDC kicking off on June 10th with a plastic budget iPhone expected to make an appearance, Apple could surprise us all with an early reveal of the iPhone 6. This would match up with the latest rumours which suggest that iPhone 6 production will begin in July, with an earlier August release date.”
Which of course contradicts rumors from as recently as last week, which pushed the “iPhone 6” into 2014, leaving us in 2013 with only the “iPhone 5S.”
iPhone 6 will be assembled in Apple’s own factories
StableyTimes.com is to be congratulated for what is undoubtedly the most audacious rumor of the week, created apparently ex nihilo (“out of nothing”): Apple is building and manning its own overseas manufacturing/assembly factories. The downside to audacity is that after this, the website will be known as UnstableyTimes.com
The post by Will Stabley starts by misstating, misinterpreting, and mangling news and rumors about two of Apple’s device assemblers, Pegatron and Foxconn.
“[iPad assembler] Pegatron [is] stating that it’s facing a surprise drop in iPad mini demand from Apple,” Stabley asserts. “IPhone 5 sales continue to soar while its manufacturer Foxconn reports massive drops in orders for it as well, with the vendor talking about life after Apple as if it’s already lost the iPhone 6.”
Neither of the companies made such assertions.
A Bloomberg story this week by Tim Culpan, on Pegatron’s first quarter results, implied that Pegatron’s CEO explicitly blamed a drop in iPad orders from Apple for an expected second quarter decline in Pegatron’s consumer electronics revenues. And that’s how it was widely and uncritically interpreted.
But Fortune’s Philip Elmer-Dewitt dissected the Bloomberg story’s problems. And he emailed Pegatron CEO Jason Cheng and asked him about his alleged comments. In reply, Cheng summarized his interacting with Culpan and concluded “I did not say anything associated with any specific products.” Or, in keeping with the company’s long-standing practice and principles, with any specific customer.
Which, as Elmer-Dewitt noted, is standard operating procedure for contract manufacturers, especially those working with Apple.
Similarly, in its recent quarterly financial report, Foxconn reported a decline in orders from one customer, without naming the customer. Apple isn’t its only customer; and estimates of the percentage of Foxconn business attributed to Apple are unreliable, ranging from 40 to 70%. Again, executives made no mention of Apple or the iPhone.
But Stabley is undeterred and, apparently unaware of the dangers of building a house on sand instead of rock (cf the Gospel of Matthew 7:24-27), constructs a new rumor before our very eyes.
“The curiously conflicting comments from the factories, which don’t line up with known sales figures and inventory availability, only make sense if Apple is quietly but broadly pulling its manufacturing orders from its longtime partners in favor of building its own factories,” he declares. It apparently doesn’t occur to Stabley that the comments are in conflict and don’t line up because there’s something mistaken about the comments or figures.
Set aside the question of what actually is “known” about Apple’s sales figures and inventory availability, except quarterly.
Let’s think about this. Apple relies on Asian OEM manufacturers who have honed their ability to manufacture complex, high quality consumer electronics products on a mass basis. This takes place, especially in the case of Foxconn, in immense factories based in Taiwan and China, staffed by hundreds of thousands of employees in some cases. As a result, these companies have a web of relationships with local and national political and regulatory authorities, local labor markets, shipping and freight carriers, and a network of scores or hundreds of component suppliers to name just a few.
Apple, according to Stabley, is preparing to scrap this entire, complex infrastructure and re-create it all by itself.
“As odd as the idea may sound, it’s the only explanation which allows the current chain of events regarding the two products to make sense,” Stabley insists.
“Odd” doesn’t begin to describe the idea.
In 2012, Apple invested $9.5 billion in capital spending, “including product tooling and manufacturing process equipment, and other corporate facilities and infrastructure.” That was more than double what it spent in 2011. Apple indicated last fall it will spend over $10 billion in the current fiscal 2013.
In a November 2012 analysis of this spending, Asymco’s Horace Dediu suggests that some of this money is to secure manufacturing assets of Sharp Corp., a financially struggling screen manufacturer and a key supplier of mobile displays to Apple. The rest of it is investing in equipment that is owned by Apple but deployed at the manufacturing plants of its OEM contractors.
“The overall story remains that Apple is still injecting vast and growing amounts of capital into production and placing those assets on its own balance sheet,” Dediu concluded.
Far from replacing the strengths and infrastructure of OEM partners, Apple’s capital spending leverages them. And the $20 billion being spent in calendar 2012 and 2013 indicate a massive growth in production capacity and, conceivably, in equipment for new categories of Apple products, as Tim Cook indicated at Apple’s most recent earnings call when he talked about product introductions starting in the fall of 2013 and continuing into 2014.
iPhone 5S or 6 due in June, or maybe July or August, no matter what Tim Cook says
If it’s Friday, the Apple supply chain must be behind schedule again. Or ahead of schedule. It all depends.
International Business Times on May 8 declared that “New rumours claimed that Apple's upcoming smartphones, iPhone 6 and 5S, is set to be launched next month along with iOS 7.”
That seems straightforward enough, eh?
“This contradicts earlier reports that the next iPhone will be released as early as later this year, according to the somewhat confused phrasing of Kristin Dian Mariano. She mentions that Apple CEO Tim Cook recently said, pretty clearly, that new hardware, software and sources would begin to be announced in the fall of 2013. Rather amazingly, she takes this as proof that “the reports on the delayed release date of Apple products proved to be true.”
The June release rumor also contradicts IBT’s post – the day before on June 7 -- that the “production of iPhone 6 and 5S may commence as soon as July.” IBT’s source for this claim was a post at PatentlyApple on May 6, which in turn cited but didn’t link to a “new Chinese report” that Apple’s “supply chain manufacturers have begun to receive component parts for the new iPhone, supposedly named the 5S.”
PatentlyApple’s Jack Purcher explains it takes two months to “reach the assembly stage,” which means the Next iPhones will be assembled in July and released in August.
“Today's latest rumor suggests that Apple could be breaking with their traditional September-only release time frame for new iPhones,” Purcher says.
That would be the ancient and venerable 2-year-old tradition encompassing the iPhone 4S, released October 2011, and the iPhone 5, released September 2012.
“The rumor is blatantly suggesting that the iPhone 5S would debut in August and a new economical entry in September.” For no identifiable reason, Purcher considers this a “stretch.”
“Yet for now, the rumor of the day out of Apple's supply chain is that Apple has moved up their part orders earlier than normal which could point to an earlier release of the iPhone 5S.”
So putting together these two websites’ “reporting,” we now know that Apple’s supply chain is running ahead of schedule and behind schedule, that the release of the Next iPhones will be later than planned and earlier than planned, and could be released in June, August, or September or possibly as early as later this year.
iPhone 5S display panel from Sharp ramps up production in June or not
More “reporting” from the supply chain.
“A report from the Far East on Tuesday says struggling LCD manufacturer and Apple supplier Sharp is ready to ramp up display manufacture for the next-generation iPhone, with mass production slated to start next month,” says AppleInsider’s Mikey Campbell.
The information, such as it is, is lifted originally from a Japanese website, Nikkan Kogyo Shimbun. The website post also caught the eye of VentureBeat's John Koetsier, who like Campbell, wrote a summary that managed to be longer than the original.
Koetsier linked to a Google Translate version of the original post, something that always require a certain, uh, flexibility of imagination to grasp its meaning, since you end up with sentences like: “Appears to have embarked on production readiness of consecutive holidays from May Kameyama Plant No. 1 of Apple smartphones LCD dedicated plagued by sluggish occupancy rate since the beginning of the year in (Kameyama, Mie Prefecture).”
A generous interpretation appears to be: the Japanese website claims that Sharp will ramp up production of iPhone 5S displays starting in June. Koetsier calls attention to this sentence: “The liquid crystal panel of the next model ‘iPhone (iPhone) 5’ Apple, specification is close to the current and the ‘iPhone 5’.”
“In other words, the 5S is the same size and shape as the 5, which means that this particular product is not the iPhone Mini or iPhone Maxi that have recently been rumored,” Koetsier explains. “Which doesn’t, of course, mean that Apple is not sourcing components for those potential products from other manufacturers.”
Exactly. What we know points to the opposite of what we thought we knew but that doesn’t mean that what we thought was happening isn’t actually happening. As Will Stabley might put it, “As odd as the idea may sound, it’s the only explanation which allows the current chain of events regarding the two products to make sense.”
Yet despite the rumors that Sharp is ramping up iPhone display production, this week also brings rumors that say, basically, the reverse. “Surprising Report Surfaces Claiming Sharp has Dropped Apple” is the headline at PatentlyApple.
“A surprising Korean report [by Korea IT News] this afternoon emphatically states that Sharp, the leading company in the small & medium-sized LCD panel market, is starkly changing its supply strategy….”writes Jack Purcher. “According to the industry on May 8, Sharp stopped the production of LCD panels for iPad as of January this year and started supplying Samsung with small and medium-sized IGZO panels instead.”
The problems with this assessment are almost as great as those associated with Stabley’s assessment that Apple is building its own assembly plants, as this March 27 story by The Wall Street Journal makes clear: “Sharp Corp. is banking on a proprietary technology with an unproven track record to revive its fortunes after it soon reports what's expected to be the largest annual loss in its 100-year history.”
Thoroughly reported, the Journal story clarifies the technology’s benefits, reveals its importance to Sharp, and puts the company’s product and financial challenges in context.
“The technology is IGZO, short for indium gallium zinc oxide, and it's a semiconductor material developed to make liquid crystal displays. It appears to be a major step forward from the more common silicon-based alternatives, promising twice as much battery life, sharper images and a more than fivefold increase in the sensitivity of touch screens for smartphones and tablets.”
Here’s how important IGZO is to Sharp, according to the Journal story: “’IGZO will be the technology to rescue Sharp,’ Takashi Okuda, the company's president, told a news conference Nov. 1  as the electronics maker warned that its financial situation was so tenuous it was worried about its future as a ‘going concern.’”
But the rescue is not assured. From the Journal: Sharp is “on track for a loss of nearly $9 billion [!] over the past two fiscal years, and its interest-bearing debt dwarfs its cash on hand by a ratio of seven to one.” The story continues: “Ironically, the exclusive advances made by Sharp's IGZO screens are limiting the company's reach. Major electronics manufacturers often insist on at least two suppliers for every key component to ensure stable supply and maintain pricing leverage.”
As noted above in “iPhone 6 will be assembled in Apple’s own factories,” Apple may have been heavily involved in 2012 in propping up Sharp’s troubled finances. Samsung recently took about a 3% equity stake in Sharp, and according to the Journal is set to expand its purchase of Sharp IGZO displays, currently found on Samsung products sold only in Japan. It’s not clear that Samsung’s stake is to persuade or compel Sharp to “drop” Apple, given how desperately the display maker needs more, not fewer, customers.
The Journal notes two other display makers are investing in IGZO, but don’t seem to have reached the level of Sharp: Innolux Corp., a unit of Taiwan's Hon Hai Precision Industry Co. (parent of Foxconn, a main assembler for Apple products) started producing IGZO displays in small quantities in February 2013; and AU Optronics Corp., also based in Taiwan, has developed IGZO displays, “but it hasn't said if or when it will start mass production.”
So we know that Sharp is ramping up production of screens for the next iPhone. And we know that it’s not.