JPMorgan analysts said in a new note Tuesday that Apple could delay its next iPhone launch by one or two months for a variety of reasons, including issues in the production process due to travel restrictions and potentially slower 5G network growth because of restrictions on work in response to the coronavirus.
However, the analysts say, the launch is unlikely to be delayed much longer than a couple of months.
Apple has launched new iPhones in September or October every year since 2011. In most years, a successful launch of the new devices, which account for over half of Apple’s revenue, is critical for the company.
But the outbreak and response to COVID-19 have raised several challenges for Apple, including disruption of its China-based supply chain for manufacturing, and now questions about demand for high-end devices in countries that have largely shut down their economies to slow the virus. Apple’s stores outside China are closed until further notice, for example, and many regions in the U.S. are under stay-at-home orders until April.
“Given multiple bottlenecks in EVT (engineering verification test, now scheduled in mid-April) and PVT (Production verification test) and pilot production (now scheduled for late June) due to recent travel restrictions imposed globally, we believe that a 1-2 month delay in iPhone launch could indeed happen, but we do not believe that a one-to-two quarter delay is very likely,” wrote JPMorgan analyst Gokul Hariharan in a note focusing on TSMC, Apple’s chip manufacturer.
All consumer electronics go through a long process before they are manufactured in large quantities. This process, called “new product introduction,” takes months, and usually requires engineers from the United States and other places to fly to China to oversee and work out problems in critical stages, such as EVT and PVT. A slowdown in one of these builds can create problems that cascade into longer delays.
The analysts also predict that lockdowns in the United States could delay carriers building out 5G networks, which would affect the timing of a new iPhone that supports 5G.
“Delay in U.S. 5G network buildout with the current lock-downs is possibly the main risk for a meaningful push-out in 5G iPhone launches,” the analysts wrote.
Hariharan writes that Apple’s processors, built by TSMC in Taiwan, are unlikely to be a bottleneck for Apple, and that Apple has already signed off on this year’s new chip.
Regardless of Apple’s iPhone launch timing, the smartphone market is in a difficult position right now amid the COVID-19 outbreak. February saw a 38% year-over-year drop in global smartphone shipments, according to an estimate from Strategy Analytics. That’s the largest drop since 2003, when the firm started tracking the statistic.
