Apple stock falls 2% as foldable iPhone production faces supply hurdles

Apple (AAPL) stock fell about 2% on Friday as investors weighed reports that initial production of the company’s long-awaited foldable iPhone remains limited, raising concerns about whether Apple can meet demand when the device launches.

According to a Nikkei Asia report, production of the foldable iPhone was running at only a few hundred units per day in late August.

The report attributed the slow initial output primarily to Apple’s stringent quality-control requirements, while the company and its suppliers work to increase production.

The production constraints come shortly before Apple’s Sept. 9 launch event, where the company is expected to unveil its latest iPhone lineup.

The foldable model represents an important product milestone for Apple as it enters a category that competitors including Samsung and Huawei have developed for years.

Apple faces foldable iPhone production challenges

Apple has reportedly targeted production of 8 million to 10 million foldable iPhones this year.

However, the company could fall short of that target if production does not accelerate, according to the Nikkei Asia report.

One supply chain manager familiar with the situation told Nikkei Asia that Apple has “very high quality requirements” and conducted an additional trial run in August ahead of actual production.

The source said output was only a few hundred units per day in late August and warned that the initial volume could be challenging to match with market demand.

Industry executives cited by Nikkei Asia said tens of thousands of devices would normally need to be produced each day to meet Apple’s planned production target.

The company has also encountered engineering and test-production challenges.

Apple is reportedly requiring more stringent durability testing than rival smartphone makers, including more extreme testing conditions, a higher number of folding cycles and greater screen flatness.

“The surface flatness and the performance of the hinge are among the details where Apple is asking for better production yields,” another person familiar with the situation told Nikkei Asia.

Two people familiar with the situation also told Nikkei Asia that Apple conducted an additional verification process in August to ensure the foldable iPhone could be mass-produced according to its specifications.

That process reportedly delayed commercial production by several weeks.

Memory shortages add pressure on Apple stock

The foldable iPhone production challenges come as the broader smartphone industry faces shortages of memory and other electronic components.

The shortages have been linked to the massive buildout of artificial intelligence infrastructure.

IDC’s latest forecast projects that the global smartphone market will decline 16.7% this year, while the memory shortage is expected to push average smartphone selling prices up by around 27.6%.

Apple has so far been less affected than some of its more price-sensitive Chinese competitors, including Xiaomi, Oppo and Vivo.

IDC data showed Apple’s global smartphone market share rose to 20.2% in the April-to-June quarter, compared with 16.3% a year earlier.

The company is also reportedly prioritizing its three most premium iPhone models this year to optimize memory allocation and marketing resources.

The standard iPhone launch has been pushed to next spring, according to an earlier Nikkei Asia report.

The foldable iPhone could therefore arrive at a time when Apple is balancing premium product demand with component constraints.

Huawei is also preparing to release its latest generation of triple-fold phones, increasing competition ahead of Apple’s launch.

Foldable iPhone could drive new growth

Despite the production concerns, the foldable iPhone is viewed as a significant milestone for Apple.

The device would mark the company’s entry into a smartphone segment already served by competitors such as Samsung and Huawei.

The new form factor could potentially create a new premium upgrade cycle for the iPhone, expand Apple’s addressable market and provide an additional growth driver as the broader smartphone market faces pressure.

Citi expects Apple’s first foldable iPhone, potentially called the iPhone Ultra, to start at more than $2,000.

The firm also expects the iPhone 18 Pro and Pro Max models to cost about $200 more than their predecessors.

Citi analyst Atif Malik said the iPhone lineup is expected to receive several major upgrades, including the A20 chip, variable-aperture main cameras on the Pro and Pro Max models, and Apple’s own modems.

The foldable model is expected to feature dual front and rear camera systems, an OLED display with an ultra-thin glass cover for the inner screen, and increased component content in areas including the battery, vapor-chamber cooling system and structural components.

Apple’s Sept. 9 event will also be notable as the first major product launch under new CEO John Ternus, who officially succeeded Tim Cook on Sept. 1. Ternus, a longtime Apple hardware executive, has described the upcoming launch as a major one.