The Most iPhones Ever Is Still Not Enough

Apple sold five million iPhones over the weekend, a record breaking number that eclipsed the 4S sales record by a solid million phones. But for the largest company in the world, breaking old records is no longer enough. Indeed, for many, the weekend number was somewhat a disappointment. See the immediate drop in Apple's stock, which fell 1.7 percent as the company missed optimistic estimates of nearly ten million. It was halfway there.

This is the new Apple, the one that every article you read reminds you is the biggest company around, the one that now apparently misses sales estimates.

Much of Apple's sales woes are directly related to its size. The company still has plenty of cultural cachet to ride on — the initial preorder inventory soldout in hours — but when you have that much tech crammed into a tiny shell of aluminum and special glass, suppliers are going to have a tough time keeping up. Just weeks before the iPhone 5 announcement, Reuters reported that Sharp was falling behind with display production for the new smartphone. “We believe that sales could have potentially been much higher if not for supply constraints,” Baird Equity Research analyst William Power wrote in a note.

It's not just the suppliers who are feeling the iPhone crunch. Manufacturers too are still coming to terms with the size of the world’s global demand for gadgets. Flanked by an aging population and rising costs of labor, Foxconn has been compelling high school interns into its ranks and China's largest employer is already considering Brazilian expansion plans. Then on Monday, a riot broke out in the dormintories of a Foxconn plant in Taiyuan. Five thousand policemen were needed to quell the worker brawl and the plant was forced to shut down temporarily. Even if the incident had nothing to do specifically with Apple's new launch, China's growing unrest is surely on Tim Cook's mind.

But Apple's production woes aren't rooted in simple growing pains. The company is starting to feel the consequences of its newly (re-)adopted attitude towards its competitors. Even as Apple pummels Samsung with litigation, the Korean conglomerate remains one of Apple's key suppliers. Samsung is the sole producer of Apple-designed chips for the iPhone and iPad. In all, Samsung products contribute 26 percent to the iPhone's component cost. After Apple's landmark patent victory, Samsung's head honchos were quick to talk up "internal firewalls," suggesting that the symbiotic relationship between the companies was safe, but Apple is already preparing for the worst. The company is already cooling its Samsung connections by ramping down component orders from its smartphone competitor, instead turning to alternatives like Toshiba, SK Hynix and LG Display. Diversifying, however prudent, isn't easy, especially for a company of Apple's sheer size. Few companies can handle the sort of scale required, highlighted by the iPhone's latest component bottlenecks, and given Samsung's obvious capacity, they seem like a necessary ally.

Apple's attitude problems aren't just affecting the amount of iPhones it can produce, but also the quality. Last week, the company was widely lambasted after releasing its vastly inferior Maps alternative. Just as the company cut out Samsung over personal squabbles, Apple decided to ditch the incredibly robust Google Maps in an effort to stifle the competition. The end result is that one of the iPhone's most-used functions is has been rendered practically useless.

Of course, none of this has actually dampened the hype or demand for Apple's latest, greatest and thinnest ever iPhone, and the company will certainly sort out its short term supply deficiencies. But the company's obsession with its competitors has left even its most ardent fanboys wondering what's next for Cook and his crew in Cupertino.

Follow Alec on Twitter: @sfnuop