Production problems could lead to shortages of the next iPhone: report

iPhone 7
Apple is expected to announce the latest version of its flagship phone next week.

Shares of Apple dipped slightly in early-morning trading following a report that “production glitches” could result in limited supplies of the next iPhone.

Apple is expected to introduce three new iPhones next week including a high-profile flagship device. The upcoming version of Apple’s high-end phone has long been rumored to be delayed, but analysts generally agreed that the unexpectedly high guidance the company issued a few weeks ago—coupled with Apple’s move to reduce its inventory of existing iPhone models—likely point to a punctual introduction of the next flagship.

But The Wall Street Journal reported late yesterday that problems early in the manufacturing process had “set back the phone’s production timetable by about a month.” Apple’s decision to use OLED screens contributed to the delays, according to the Journal, and the company has had problems embedding its fingerprint scanner in the new displays.

Apple reportedly scratched plans to use the fingerprint entirely after production was pushed back by a few weeks, the Journal reported, citing unnamed “people familiar with the situation.” The problems could result in limited inventories when the phone becomes available for preorders, which presumably will occur later this month.

Shares of Apple slid $1.18, or 73%, after the market opened this morning.

The news comes as the smartphone market approaches what is likely to be a particularly competitive holiday shopping season, however. Apple is widely expected to introduce a redesigned iPhone next week and Google is set to launch a second-generation Pixel, while Samsung recently unveiled the Galaxy Note 8 and Sprint recently began taking preorders for the first phone from Andy Rubin’s Essential Products.

Apple is widely expected to introduce a dramatically redesigned iPhone, and the gadget is likely to sport a price tag approaching $1,000. Carriers are sure to step up their promotional activity supporting the new high-end handsets to gain market share during the holiday shopping season, and Apple could be particularly vulnerable if operators have difficulty keeping the next iPhone in stock.

“Remember that just a year ago, we saw iPhone subsidies of $300 to $400 on equipment installment pans that were supposed to be ‘unsubsidized,’” Craig Moffett of MoffettNathanson wrote in a note to investors this week. “With more reasons for carriers to want customers to upgrade this time around, with the addition of Comcast as a competitor, and with the iPhone 8 rumored to cost over $1,000, it’s not inconceivable that this year’s promotions could exceed the high bar set in 2016.”

If the next iPhone truly is in short supply, though, carriers could shift some of their promotional efforts to other handsets.

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