Report: Apple Facing Major Supply Shortage for iPhone 7, Due to Faulty Components

apple-logo-2According to a report from Japanese publisher Nikkei, Apple Inc. (NASDAQ:AAPL) could fall short of its initial iPhone 7 production goals due to a rash of faulty components.

From the report:

“If Apple sticks to its launch schedule from last year, there may not be enough supply at the beginning, as some suppliers are still trying to fix low yield rates of their components,” an industry source familiar with the issue said.

The yield rate is a measure of how many salable units a manufacturer gets at the end of the production process. Low yields could entail higher costs for manufacturers or failure to deliver enough volume of product to customers.

Last year’s launch schedule mentioned above involved a Sept. 9 announcement date and a Sept. 25 roll-out date. Allegedly, Apple would not be able to hit a similar schedule this time around because of the aforementioned production issues.

The source’s claim is echoed by Jeff Pu, an analyst at Yuanta Investment Consulting.

Pu cut his forecasts for iPhone production to 114 million from 120 million, including both new and old models, in the July-December period, due to defects in the waterproof speaker and dual-camera module, which have yet to be resolved.

“We estimate total iPhone 7 builds to be 74 (million) in 2H16F, compared to 84 (million) for iPhone 6s in 2H15. Together with pricing pressure, we expect most Apple food chain suppliers to see (year-on-year) revenue decline for the rest of the year,” Pu wrote in a note dated Aug. 23.

Apple is currently dealing with waning market share in the smartphone market, and cannot afford major delays or a weak product launch this time around.

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Apple shares rose slightly in Friday morning trading to $107.76. AAPL has gained about 2.4% year-to-date, versus a 7% rise in the benchmark S&P 500 during the same period.

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