"Apple continues to struggle with the workaround for the fingerprint sensor,” writes Hargreaves, "This increases the potential that the new OLED iPhone could be delayed, or ship without a fingerprint sensor, either of which could increase risk to unit sales and mix for the cycle."
It's believed that Apple is attempting to put a fingerprint sensor in the screen of the next generation iPhone; however, multiple sources have suggested that the technology may not be ready for production.
We believe it would typically take 12 weeks from placement of fingerprint IC orders to full volume production of iPhones. Consequently, if Apple is able to solve its fingerprint problems and place orders for fingerprint ICs before August, it would likely be able to reach volume production in late October or early November. We believe this remains Apple's preferred path, and expect it would be acceptable to both consumers and investors. It is entirely unclear if Apple will be able to fix the problem in this time frame.
Similar to a recent Ming-Chi Kuo prediction, KeyBanc suggests that it's increasingly likely that Touch ID will be dropped for facial recognition.
Abandon the fingerprint sensor entirely and rely solely on facial recognition for login and authentication. This option appears increasingly likely as time passes, but is far from ideal. We believe Apple’s facial recognition solution should work from many angles and in low-light environments. However, it would not work without clear line of sight to the user's face. Even if this encompassed just 5% of login scenarios, it would mean that several times a day the new iPhone would perform worse at an elemental feature than older iPhones, which would risk pushback from consumers. Further, we do not believe facial recognition would be initially qualified as an acceptable verification method for Apple Pay. While Apple could achieve this over time, the likelihood for an initial lack of Apple Pay could adversely affect demand.
While considered unlikely, a delay until mid-November wouldn't have a meanful impact on KeyBanc's expectations. Any later and iPhone mix and total unit volume for F2018 would be affected.
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