Apple Inc.’s Recent Struggles

Apple

Rumors of the exact release date of the new iPhone 7 are still swirling. Some claim that the company, as per tradition, will launch the new phones in September. While Apple Inc. has still not declared a release date, the phones might be delayed, as its chief supplier, Samsung, is struggling to meet their order.

Apple and Samsung might have a bitter rivalry over patents, but both have worked together before. Apple has worked with Samsung’s partner, GlobalFoundries, to produce many of the iPhones’ internal parts. This time around, too, they outsourced the production of their next generation mobile processor chips, called A9s, to the South Korean company because of their new 14 nm technology. The new fabrication process allows them to pack more transistors into a given space while drawing less power, which is a highly sought-after trait for most smart phone companies. However, insider reports from this month have put Samsung’s manufacturing yields at around 30 percent of the entire requirement.

To meet this shortage, Apple has had to partner with Taiwan Semiconductor Manufacturing Company (TMSC) at the last minute. TMSC had initially produced the A8 processing chips, which were used in the iPhone 6 and iPhone 6 Plus, and now will be filling in the gap. It is not a complete loss for Samsung, as it could be the unexpectedly high demand for the Galaxy S6 that is keeping GlobalFoundries busy.

Apple’s recent struggle with the iPhone 7 release comes on the heel of their delayed shipment of the Apple Watch, their first venture into wearable technology. The company started taking pre-orders and the watch was supposed to hit the shelves on April 24, but has now been delayed by at least three months. With pre-orders hitting over two million, loyalists believe the watch to be the next big thing for the Cupertino company. Apple’s retail chief, Angela Ahrendts, also noted that due to an increase in global interest and limited supply, the in-store availability of the watch has been pushed back, with some models not being available till July.

The watch is seen as the company’s most profitable product ever, but when the watch was released, many people questioned its usage. They saw it just as an extra screen to go with the iPhone. The cheapest version of the watch is the Sports model, which costs $349 and the high end version is $17,000. Apple has to deliver and justify the price difference and provide more use cases for their watch at that price point. There is also a need to educate the users about some of the new features they are introducing, including the Digital Crown, which lets one zoom in and out of the screen. In mechanical watches, the crown is usually used to set the time, but in the watch, it lets users navigate and scroll through lists. The company has announced workshops at participating retail stores to show customers how to use their devices.

If that was not enough, the company is also facing trademark issues in Switzerland on their logo. Leonard Timepieces is a Swiss company which has exclusive rights to the use of the word “Apple” on jewelry and the watch falls under that. The technology giant would have to wait until the trademark expires or acquire it before they start selling the watches.

The mobile wallet facility of the technology company, Apple Pay, has also been struggling, as many banks dislike the terms being proposed by the company and have called it. In China, where the product was made available last year, banks have simply refused to sign up. Union Pay, the only banking system which is allowed to conduct interbank transactions, has not yet signed up for the service. The company is also in talks with Canadian banks and is looking at a fall launch in the country. However, the six main Canadian banks – Royal Bank of Canada, National Bank of Canada, Bank of Nova Scotia, Bank of Montreal, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce  – are concerned about the terms of agreement for Apple Pay. Banks, in both China and Canada, believe that Apple is charging too much money for each transaction.

Apple Pay is also suffering from checkout problems as customers are running into cashiers unfamiliar with the service. The cashiers in turn have trouble getting the payment terminals to work. According to a study by Phoenix Marketing International released in March, 47 percent of the users who had the service and went to a listed Apple Pay merchant, found the store either unable or unwilling to accept the service.

While Apple’s struggles continue, all is not lost, as recent prediction by analysts suggests that the company is all set to become the highest-valued company in the world at $1 trillion. Analysts and investors are holding out hope, even with the recent fall in stock prices. Customers are also looking forward to the release of the new iPhone 7 and the watch to hit the markets.

By Anugya Chitransh

Sources:

Motley Fool

Wall Street Journal

USA Today

Learn Bonds

IT Pro Portal

Phoenix MI

Photo by Adam Fagen – Flickr License

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