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Jefferies cites iPhone 5s Touch ID concerns, lowers target to $425

updated 03:45 pm EDT, Sat September 14, 2013

Jefferies not sure on fingerprint sensor yields

Apple's Touch ID fingerprint sensor on the new iPhone 5s may very well be holding up production of that device enough to keep quarterly sales below expectations. This according to global investment banking firm Jefferies, which released a report this week saying that its own channel checks indicate that Apple suppliers have begun receiving build plan cuts. Jefferies lowered its price target for AAPL from $450 to $425 on that news, as well as concerns about the pricing of the iPhone 5c.

The Touch ID sensor in the iPhone 5s is a capacitive sensor that makes a map of the sub-epidermal layer of a user's fingerprint. It greatly increases security on the device, and may very well give Apple an even bigger advantage in the enterprise segment, but it is reportedly difficult to produce reliably. Jefferies' report says that production yields on the sensor "have been terrible."

Other components in the iPhone 5s are more easily produced. The device's M7 motion coprocessor has reportedly resulted in no problems. The A7 processor is made with the same process as its predecessor, so Jefferies is confident that the production issue lies with Touch ID.

According to sources, Apple's order cut to other suppliers is in the range of seven million units. Jefferies lowered its unit sales estimate for the quarter based on this figure.

Aside from the iPhone 5s, Jefferies also expressed concern about Apple's strategy in pricing the iPhone 5c. The 5c, the report claims, is "priced like Apple's prior generation handsets rather than to a new level." The firm believes Apple should have hit the sub-$400 mark in order to better compete in the mid-range segment.

Jefferies' assessment is the latest in a string of downgrades from analysts, many of which cited the iPhone 5c's pricing as the reason for wariness. After the new iPhones' introduction, Apple shares slid by more than five percent due to investor concerns over the 5c's price point.

by MacNN Staff



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