iPhone 5 design, quality demands slows manufacturing

Apple's manufacturing partner is having trouble keeping up with high demand for the new phone

You're facing a three to four week wait if you order an iPhone 5 today, according to Apple's Website. Partly, that's because Apple's manufacturing partner is having trouble keeping up with high demand for the new phone.

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A comment this week by Terry Gou, chairman of Foxconn Technology Group, is being interpreted by some as evidence that Apple's design for the new phone is needlessly complex, making it hard to manufacture in high enough volumes to meet the demand.

Those constraints may crimp Apple's competition with rival Samsung, whose Galaxy S III smartphone for the first time outsold the iPhone 4S in third quarter 2012, according to a report this week by Strategy Analytics. The Samsung phone was snapped up by 18 million buyers, vs. 16.2 million for iPhone 4S.

"It's not easy to make the iPhones. We are falling short of meeting the huge demand," Gou told reporters after a business forum Wednesday, according to Reuters and other news sites. Foxconn is the trade name for Taiwan-based Hon Hai Precision Industry Co., which manufactures the iPhone and other Apple products at factories in mainland China.

The Wall Street Journal reported Gou as saying Foxconn is shipping "far fewer" phones than Apple has requested. "Market demand is very strong, but we just can't really fulfill Apple's requests," Gou said. Some of the quality standards can't be met "due to design-related production difficulties," according to the article (which is behind a paywall but accessible via Google News).

"The scarcity of the phones has been weighing on Apple's share price as well, as investors are concerned Apple may not be able to meet consumer demand in the near future, weighing on its earnings," according to the Journal story.

Gou's apparently brief public comments echo those of an unnamed Hon Hai executive quoted in a Journal blogpost by Lorraine Luk in October. "The iPhone 5 is the most difficult device that Foxconn has ever assembled. To make it light and thin, the design is very complicated," the executive was quoted as saying.

At least at that time, one issue was the propensity for the new phone's metal exterior to suffer scratches. "Hon Hai has recently implemented a new quality check procedure to reduce the chance of damages," Luk reported in her blogpost. "But [the executive] noted the iPhone 5 uses a new coating material that makes it more susceptible to scratching."

Almost at once pundits began speculating that the new iPhone's design was needlessly complex.

It's "so complicated that the company Apple and most of the consumer electronics world considers the best contract manufacturer on the planet can't figure out how to build it in a way that keeps up with demand while maintaining quality," complains Erica Ogg, writing at GigaOm. "It's worth wondering if perhaps Apple went overboard. At what point do we begin wondering what the guys in Apple's design team were thinking?"

Ogg speculates that iPhone designer Jonathan Ive may be to blame, or perhaps the late Steve Jobs. "CEO Tim Cook's background is supply-chain management and manufacturing, and it would be surprising for him to put the iPhone 5 on the company's most aggressive roll-out schedule ever if he didn't think they could meet those goals," she writes.

"But there could be other dynamics at work here: maybe Jony Ive, who leads the industrial design group, gets to have the iPhone design he wants and Cook figures out how to get it made in huge volumes. After all, as Jobs told his biographer, Jobs set it up before he left 'that there's no one at the company who can tell Ive what to do.'"

But it's not clear what Jobs' statement means in practice, since it would in effect put Ive in charge of the company, not Cook.

In his comments this week, Foxconn's Gou didn't go into details. He "declined to say which of the phone's design features has caused production issues and how long it will take for those issues to be solved," according to the Journal. "He also refused to comment if Hon Hai plans to outsource some of the iPhone orders to other makers, or to its Hong Kong-listed subsidiary Foxconn International Holdings Ltd., as some analysts suggested last week."

Apple sold 5 million iPhone 5 units in the first weekend of sales in September, but has not released any sales figures since then, or indicated when the three to four week delay might ease.

John Cox covers wireless networking and mobile computing for Network World.

Twitter: http://twitter.com/johnwcoxnww

Email: john_cox@nww.com

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