The sprint to get iPhone X on the market
New, advanced features such as facial recognition stall production of Apple’s 10th-anniversary edition
As of early fall, it was clearer than ever that production problems meant Apple wouldn’t have enough iPhone Xs in time for the holidays. The challenge was how to make the sophisticated phone — with advanced features such as facial recognition — in large enough numbers.
As Wall Street analysts and fan blogs watched for signs that the company would stumble, Apple came up with a solution: It quietly told suppliers they could reduce the accuracy of the face-recognition technology to make it easier to manufacture, according to people familiar with the situation.
With the iPhone X set to debut on Nov. 3, we’re about to find out whether the move has paid off.
Some analysts say there may still be too few iPhone Xs to meet initial demand. Ming-Chi Kuo of KGI Securities predicts Apple will have two to three million handsets available on launch day and 25 million to 30 million units for the holiday quarter, down from his previous forecast of 40 million. For comparison, Apple sold 78 million phones during the same period last year, although that included all models.
Apple is famously demanding, leaning on suppliers and contract manufacturers to help it make technological leaps and retain a competitive edge.
While a less accurate Face ID will still be far better than the existing Touch ID, the company’s decision to downgrade the technology for this model shows how hard it’s becoming to create cutting-edge features that consumers are hungry to try.
Apple spokesperson Trudy Muller said “Bloomberg’s claim that it reduced the accuracy spec for Face ID is completely false and we expect Face ID to be the new gold standard for facial authentication. The quality and accuracy of Face ID haven’t changed; it continues to be one in a million probability of a random person unlocking your iPhone with Face ID.”
While Apple has endured delays and supply constraints in the past, those typically have been restricted to certain iPhone colours or less important offerings such as the Apple Watch.
This time the production hurdles affected a 10th-anniversary phone expected to generate much of the company’s revenue.
About a month ago, Foxconn Technology Group pulled as many as 200 workers off an iPhone X production line. Apple was struggling to get sufficient components for the phone and needed fewer people to put it together. The main culprit, the people said, was the 3D sensor that recognizes faces and unlocks the handset. Foxconn declined to comment. The sensor was always going to be a major technical challenge. Until the iPhone X, the most significant deploy- ment of the technology was in Microsoft’s Kinect controller, which the Xbox console used to detect a gamer’s movements.
But the Kinect was the size of a large book, and Microsoft sold just 24 million units of the controller over two years, a far easier production challenge than the one confronted by Apple, which sells more than 200 million iPhones a year.
The IPO, which raised $200 million, comes two years after the company agreed to sell a majority stake to New York-based private equity firm Searchlight Capital Partners.
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The 16.7 million shares offered in the IPO were sold by Searchlight and the founding shareholders, according to a company filing. The company will not receive any of the proceeds from the sale, it states.
The IPO was led by Toronto-Dominion Bank, Credit Suisse Group AG and Bank of Montreal. The banks have the option of purchasing additional shares that could bring the proceeds of the offering up to $230 million if exercised.
Following the IPO, Searchlight will control 48 per cent of the company while the founders will own about 12 per cent, according to the filing. If the over-allotment is exercised, that will fall to 43 per cent and 11 per cent respectively.