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.