Improvement in iPhone 5 Production Expects to Boost Apple’s Profitability
The supply of the iPhone 5 continues to improve as yield rates on the difficult-to-build handset reportedly have grown. This is a result of reduced costs and boosted profitability for Apple and its suppliers. According to Shaw Wu of Sterne Agee who checked with members of Apple’s overseas supply chain the yields on the iPhone 5 are still improving. The progress comes as estimated shipping times from Apple’s online store have improved to between two and four days, while the handset is currently set to launch in more than 50 countries this month.
Availability of the iPhone 5 continues to improve despite what Wu referred to as “robust demand” for the device. He expects Apple will sell 47.3 million units in the December quarter, a forecast slightly greater than market consensus of between 45 million and 46 million iPhones sold during the holiday quarter.
News of improved production of the iPhone 5 also prompted Wu to increase his gross margin forecast for Apple’s current quarter. According to him, Apple will achieve margins of 38.5% during the three-month frame, up from a previous prediction of 38%. Apple was said to have faced a number of issues in manufacturing the redesigned iPhone 5. An official with Apple assembly partner Foxconn previously said the iPhone 5 was “the most difficult device” it has ever been tasked with building.
Although supply of the iPhone 5 is now said to be improving, Apple hasn’t been able to catch up with demand for the iPad mini. Wu said his research found that iPad mini demand is stronger than expected, and tat’s believed to be the main reason as to why lead times remain at two weeks. Apple is also facing issues with its redesigned iMac lineup as the new ultra-thin design has also resulted in manufacturing yields. As a result, Mac sales for the December quarter are expected to be lighter than expected, thanks to limited iMac availability as well as what he calls “minor cannibalization” from the iPad and iPad mini.
Overall, Wu expects Apple’s holiday will result in $54.6 billion in revenue and $13.70 in earnings per share, higher than consensus expectations of $54.4 billion and $13.30. For the fiscal year of 2013, he predicts Apple will earn $193.4 billion in revenue and $49.50 in earnings per share, also higher than market consensus of $194 billion and $49.28.