Nikkei Asian Review: Apple to delay 5G iPhone, but no opportunity lost

Apple will likely delay the launch of its first 5G iPhones, originally scheduled for September, as the coronavirus pandemic threatens global demand and disrupts the company’s product development schedule, sources familiar with the matter have told the Nikkei Asian Review.

The company has held internal discussions on the possibility of delaying the launch by months, said people familiar with the matter, while supply chain sources say practical hurdles could push back the release till 2021.

“Supply chain constraint aside, Apple is concerned that the current situation would significantly lower consumer appetite to upgrade their phones, which could lead to a tame reception of the first 5G iPhone,” said a source with direct knowledge of the discussion. “They need the first 5G iPhone to be a hit.”

Nikkei said that Apple had set an aggressive target for the release of a 5G iPhone for this September, instructing mobile suppliers to prepare to make up to 100 million units of the new devices for 2020 and designing four different models of the handsets.

Apple is closely monitoring the coronavirus outbreaks in the U.S. and Europe, its two largest markets that together account for more than half of its sales, and assessing whether a delay is necessary, the sources told Nikkei.

All of the employees at Apple’s headquarters are working from home indefinitely, as the company is subject to the Santa Clara County and the California state-wide “shelter in place” order, which requires all workers at non-essential businesses to stay at home (and tele-work if possible). The exact timetable for the 5G iPhone launch might not be finalized till that order is lifted, one of the sources said (and that could be sometime in June according to KCBS radio commentators).

“Apple will make a final decision around May at the latest, given the fluid situation globally,” another person told Nikkei.

The engineering development of the 5G iPhone has also been affected by travel curbs introduced in the U.S., China and elsewhere to combat the coronavirus, two people with knowledge of Apple’s schedule said. The company was supposed to work with suppliers to develop a more concrete prototype for the new phones from early March, but it had to delay such close collaboration, which requires hands-on testing, indefinitely.

Suppliers have not been officially notified of a possible change in the production timeline, and Apple is even urging many of them to make up for time lost due to coronavirus-related disruptions.

“We are not giving it up yet. We are doing whatever we can to sort the issue out,” a person with direct knowledge of the matter told Nikkei.

“The discussion is still at an early stage, and the fall launch is not completely off the table,” one of the sources with direct knowledge of the issue said. “But the 5G iPhone could be postponed to 2021 in the worst-case scenario.”

Suppliers agree that given where the company is in the engineering process, the possibility of a delay is looming.  Some component suppliers, moreover, have told Nikkei that they have been instructed to defer their mass production schedule for about two to three months.

“We have been notified to start shipping in big volumes to meet Apple’s new product launch by the end of August, instead of like in previous years, when it would be sometime in June,” said a supplier of components related to printed circuit boards. “The change was made very recently, and that could imply that the mass production of the phone could also be delayed for months.”

The worst-case scenario, delaying the launch until 2021, would do more than just disrupt Apple’s roadmap for product releases.

The decision of the world’s most profitable smartphone company involves hundreds of global suppliers in the U.S., Europe, Japan, South Korea and China, Apple’s biggest manufacturing hub. Millions of production line jobs could be affected in the world’s second-largest economy during the peak production season for iPhones in the second half of the year.

“It’s a very tough decision for Apple to make,” as the ripple effect would be very big, another source familiar with the discussion told Nikkei.

“If any big tech company like Apple delay its plan for important new products … the issue could be even bigger than whether the supply chain could meet its schedule. It implies that they really see end demand weakening and the whole economy not recovering soon,” Joey Yen, an analyst with research company IDC, told Nikkei. “As of now we are still hoping everything can gradually recover to normal by the end of this year but for now the scenario is moving toward the pessimistic side, that the global economy could be significantly impacted.”

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Opinion:

We don’t think Apple delaying launch of a 5G iPhone will cause them to lose any significant revenue, as 5G roll-outs and upgrades will be delayed due to the coronavirus.

Moreover, 3GPP Release 16 and 17 have been delayed as we reported yesterday. We expect IMT 2020, scheduled for completion late this year, will also be delayed till mid 2021 as ITU-R WP 5D face to face meetings will be cancelled.

References:

https://asia.nikkei.com/Spotlight/Coronavirus/Apple-weighs-delaying-5G-iPhone-launch-by-months-sources-say

3GPP delays Release 16 and 17 Freeze by 3 months; IMT 2020 impact unclear

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