Apple shares dip on supply worries

September 25, 2012

Apple shares took a bigger slide Tuesday as reports circulated about possible supply problems related to the screen in the company’s new iPhone.

Apple stock closed about 2.5 percent down, for a share price of $673.54, but was rising slightly in after-hours trading.

Analysts are identifying the new iPhone’s screen as the main culprit behind reports of smartphone shortages. The iPhone 5 has a display with an integrated touch panel — a decision that improves the display but also makes it more complex to replace.

“You have to replace the whole thing all at once,” said Kyle Wiens, chief executive of iFixit, a site that publishes guides for users to fix their own gadgets.

Wiens said that Apple has made several innovations with its displays that make it harder to produce, such as bumping up the resolution to a “retina” display quality. Making the screen into one unit, he said, cuts down on the screen’s glare.

Apple said that it may not fill all pre-orders until October, prompting analysts to lower some expectations for the quarter ending in September. Telecom analyst Kevin Smithen of Macquarie Securities said in a note to investors that he has revised his estimates for iPhone activations to 3.2 million from 4 million for the quarter.

Still, Apple will likely be preparing for a big holiday season, and Wiens thinks that the company will be able to meet demand for the next quarter.

Apple is known for its efficient supply chain — an accomplish largely credited to Apple chief executive and former chief operating officer Tim Cook.

Working with screen manufacturers such as Sharp and LG, Wiens said, also gives Apple a technological and competitive edge. As Apple invested in the research used to build the displays, Wiens said, the company likely has exclusive rights to the components for a period of time. The same is true of many of the main processors and other chips in the phone, he said.

Related stories:

Apple choice of thin display seen driving iPhone 5 shortage

Foxconn and Apple supply: What are the effects?

Apple’s iPhone 5 weekend sales fall short of analysts’ estimates

Hayley Tsukayama covers consumer technology for The Washington Post.
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