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Apple (AAPL) iPhone 5 Demand Tough for Foxconn to Cope With

 November 07, 2012 12:22 PM

(By Balaseshan) Apple Inc.'s (NASDAQ: AAPL) iPhones assembler Hon Hai Precision Industry, the entity of parent Foxconn Technology Group, is finding it hard to cope with the massive demand for iPhone 5 units, according to a Reuters report.

As reported by Reuters, Foxconn Chairman Terry Gou admitted, "It's not easy to make the iPhones. We are falling short of meeting the huge demand".

But, according to the Wall Street Journal, Gou said Foxconn is shipping "far fewer" iPhone 5 models than Apple requested on quality control issues. Gou 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.

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Analysts have reported Foxconn expanded production of the iPhone 5 to its other unit, Foxconn International Holdings (FIH), which typically makes non-Apple products, to address the shortfall. However, Gou declined to comment on brokerage reports saying that FIH had taken on some production.

Following the launch, The Wall Street Journal reported an executive saying the iPhone 5 is "the most difficult device that Foxconn has ever assembled. To make it light and thin, the design is very complicated."

On September 24, Apple said it has sold over five million of its new iPhone 5 - the thinnest and lightest smartphone ever - in the first weekend after the launch, breaking the previous record of four million held by the iPhone 4S.

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Apple said iPhone 5 demand exceeded the initial supply and while the majority of pre-orders have been shipped to customers, many are scheduled to be shipped in October.

"While we have sold out of our initial supply, stores continue to receive iPhone 5 shipments regularly and customers can continue to order online and receive an estimated delivery date. We appreciate everyone's patience and are working hard to build enough iPhone 5s for everyone," said Tim Cook, Apple's CEO.

In addition, as previously expected by BMO Capital Markets analyst Keith Bachman, Apple guided the first quarter below the Street view as the tech giant is experiencing supply constraints related to iPhone 5, making it difficult to cater to the huge demand.

AAPL is trading down 3.01 percent at $562.76 on Wednesday. The stock has been trading between $363.32 and $705.07 for the past 52 weeks.

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