The Nikkei Asian Review reported that Apple “is preparing the ground to possibly delay the launch of the first 5G iPhones … with a worst-case of delaying the launch until 2021,” given engineering and supply constraints. We have a different view and believe it’s likely Apple will host a fall iPhone 5G launch. Our thoughts:
- It’s a misunderstanding that an iPhone is designed in a year. Johny Srouji, Apple’s head of Hardware Technologies has commented that engineers and designers can work on iPhone features for years in advance of the launch.
- We estimate that it typically takes 3-4 years to take an iPhone from concept to launch. That implies that by the end of March in a given year, the vast majority of work on an iPhone design and planning with the supply chain is already done.
- China manufacturing and assembly, including some of Apple’s most important partners like Taiwan Semiconductor (TSMC), are beginning to ramp production. Taking the view that China production will remain stable (which can quickly change), the supply chain should be positioned to supply several million iPhones by the end of September, in line with supply for previous launches.
- Demand for the upcoming iPhone will likely be muted initially, as it will reflect overall consumer demand in the fall which we expect to be soft.
- We remain optimistic that, over the next five years, 5G’s impact on our lives will exceed its hype, and Apple is one of the best ways to invest in the transformation driven by 5G.
Decade Planning’s Competitive Advantage
In the midst of 5G iPhone delay rumors, it’s important to keep in mind that Apple plans its business in terms of decades, not years – an under-appreciated long-term competitive advantage. At the core of this advantage is the company’s balance sheet, which allows it to survive the unexpected; everything from COVID-19, to a financial crisis, or weak initial demand for a new iPhone. Having the luxury to plan beyond the unexpected is one reason why we remain confident in Apple’s ability to maintain and extend its tech leadership in the years ahead.