Apple's dimming luster roils suppliers, investors

Apple's dimming luster roils suppliers, investors

Apple Inc marketing chief Phil Schiller let slip during last August's courtroom battle with Samsung that when setting forecasts for new iPhones, the inside joke was that people should assume sales would equal all previous versions combined.

That quip, uttered in front of Samsung Electronics Co Ltd's trial lawyers and the media, no longer rings true as Apple appears to be losing a once vice-like grip on its supply chain and Wall Street.

Suppliers and investors are struggling to gauge demand for the iconic smartphone as Samsung and up-and-coming rivals grab market share. Indications of reduced shipments now send shares in Apple and its component-makers into a tailspin. And criticism that innovation has stalled after the death of its legendary co-founder Steve Jobs 18 months ago is hurting sentiment in a stock that closed the week below $400 for the first time since December 2011.

Sources at several Asian suppliers, which for years basked in the glow of Apple's success and enjoyed stock gains even on rumors they might be among the select group of companies to sell components to Apple, told Reuters this week about ever-moving deadlines and said they were trying to reduce their reliance on the company.

An Apple supply chain source in Japan said those in the industry often jokingly refer to the company as "Poison Apple" because of its hard-to-meet high standards and low price expectations.

"'Apple can do no wrong' can only work until Apple does wrong," said Roger Kay, president of researcher and consultancy Endpoint Technologies Associates. "It's like the rubber band effect. The more you stretch it, the more snap you get coming back."

Apple reports quarterly results on Tuesday and declined to comment for this story. It has consistently said it focuses on making the best products - its iPhones remain the industry gold standard - and avoids discussing product strategy.

CEO Tim Cook stressed on the last quarterly earnings conference call that it's difficult to paint a complete picture of its production process from "a few data points".

Supplier sources in Japan and Taiwan, home to dozens of Apple suppliers, said they initially expected mass-production of the next iPhone to begin in June.

That date may have begun to slip beyond June, the sources said. The phone, widely referred to as the iPhone 5S, is expected to include new features such as a fingerprint sensor. A supply chain source in Taiwan said Apple was trying to find a coating material that did not interfere with the fingerprint sensor, and this may be causing a delay.

In addition to the 5S, suppliers say Apple is also developing a cheaper model, which can appeal to lower-income buyers in growth markets such as China and India. A supplier source in Japan told Reuters small-scale production of display panels will begin in May, ramping up to mass production in June.

Both phones will use the same 4-inch screen, but the cheaper version will probably not include the new fingerprint technology and sport a cheaper plastic casing, the sources said.