Will an iPhone Manufacturing Shift Delay Apple's iPhone 5S?

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Foxconn Electronics wants to make a massive iPhone manufacturing shift in order to streamline operations and reduce the losses incurred by one of its divisions. According to DigiTimes , Foxconn wants to move iPhone orders from Foxconn Electronics to Foxconn International Holdings, which typically handles the firm's handset production duties.

The shift is subject to approval by Apple (NASDAQ: AAPL ). Without the Mac maker's consent, Foxconn will be forced to continue producing iPhones within its electronics division.

This rumored adjustment comes only months before the iPhone 5S -- the unconfirmed update to the iPhone 5 -- is expected to go into production. Apple is largely believed to be planning a new iPhone for release in the third or fourth quarter, coinciding with the September/October timeframe of the last two iterations. Apple is also expected to update the full-size iPad, iPad Mini and other key devices around the same time.

While Foxconn is still the world's largest manufacturer of electronic devices, the company's headset division has suffered greatly now that Motorola and Nokia (NYSE: NOK ) have taken a dive. Both firms used to make up a significant portion of FIH's business. Now that they are selling fewer phones, they are placing fewer orders with Foxconn.

Since the company currently manufactures iPhones at Foxconn Electronics, it is not yet clear what affect it will have (if any) on that division.

More importantly, it is yet known if this would negatively impact the production of the current iPhones or any future models Apple hopes to produce. What may be good for Foxconn could end up being terrible for Apple.

That being the case, one would imagine that Apple would not approve the manufacturing shift -- or delay it until after the next iPhone is completed.

Apple has reportedly rejected as many as eight million iPhones manufactured by Foxconn over quality concerns. Each returned iPhone is said to cost Foxconn $32 apiece, leading to a couple hundred million dollars in potential losses.

This could be what the company means when it aims to streamline operations. By shifting to FIH, Foxconn may either plan to produce fewer faulty devices or simply offload the mistakes onto an ailing division.

If quality is really a Foxconn goal, then Apple might want to question why FIH did not produce the smartphones all along.

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: AAPL , NOK

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