Foxconn Could Take Up To $1.6B Hit As Apple Rejects 5-8 Million Defective iPhones [Report]

iphone-5-foxconn

A Chinese paper is reporting that Apple and Foxconn may have had a staggering setback in the production of the iPhone, with up to eight million iPhones returned to Foxconn because they didn’t meet Apple’s standards.

According to China Business, between five and eight million iPhones — probably the iPhone 5, and not the upcoming iPhone 5S — were returned to Foxconn in mid-March due to production problems, like “a substandard appearance or malfunction.”

If true, this could be a huge hit to Foxconn’s bottom line: up to $1.6 billion, if every aspect of the returned handsets were malfunctional. That’s unlikely: it’s more likely these existing handsets can be refurbished for parts.

Either way, though, this highlights a growing problem: Apple’s products just become increasingly difficult to make. A Foxconn official complained about it back in October, saying “The iPhone 5 is the most difficult device that Foxconn has ever assembled.” The difficulty in delivering iPhone 5’s that matched Apple’s quality standards were what, in part, lead to extreme shortages in the late part of last year, as Foxconn CEO Terry Gou lamented “It’s not easy to make the iPhones. We are falling short of meeting the huge demand.”

Given that the iPhone 5S is likely to be even more difficult to produce than the iPhone 5, this looks like trouble for Foxconn. If even the iPhone 5 is so hard to produce that Foxconn — the most sophisticated mass-producer of gadgets in the world — is having shipments of up to eight million devices rejected seven months into the iPhone 5’s lifecycle, how much harder will the next-generation models be?

Update: Foxconn is denying the report.

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  • lwdesign1

    Thanks for spreading the FUD around John! Your article is 90% speculation that casts all kinds of doubt on Apple and Foxconn’s ability to deliver, and throws the “Apple is DOOMED” community with all kinds of ammunition for more attacks.

    How about this instead: “Foxconn screwed up about 5-8 million phones and Apple is being a responsible business by returning defective phones so that their customers won’t have problems with them.” Gee, that sounds very positive, like Apple is being a terrific company by making sure buyers have a great experience with their products — but instead you choose to ramp up the fear factor that Apple is somehow NOT in control!

    Sure, iPhones may be complicated to make, but THAT’S FOXCONN’S JOB: TO MAKE WORKING iPHONES! Your article plays right into the hands of the nervous, twitching investor and helps drive the price of Apple stock even lower. Irresponsible!

About the author

John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his girlfriend and two parakeets. You can follow him here on Twitter.

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