Once again, an Apple launch is accompanied by complaints and lawsuits. But the actual number of instances is small—and unavoidable

by Arik Hesseldahl

Whenever anything complex is manufactured in large quantities, there's bound to be a certain amount of failure.

When the product being manufactured is as complex as an iPhone, where there are a scores of components, each of them complex in their own right and subject to their own potential failures, then the mathematical likelihood of a glitch in the final product increases.

What's important about bugs or glitches in any new product, annoying as they may be, is what the manufacturer learns from each individual episode and what's done about it to ensure that it doesn't recur. Henry Ford called failure an opportunity to begin again more intelligently.

Touch Screen and Charge Issues

So why am I putting the word's "failure" and "iPhone" so close together when from all outward appearances, Apple's (AAPL) iPhone has been nothing but a success (see BusinessWeek.com, 7/26/07, "iPhone by the Numbers")?

It's because a small number of people experiencing problems with the screens and the AC power adapters that came with their iPhones have been sharing their experiences on a few Web forums. Naturally, these problems gained some notice in the media over the past few weeks. This roughly coincided with the appearance of "refurbished iPhones" selling on Apple's Web site, proving that Apple, like nearly every tech company, resells products that are in good working order but have been returned by customers who for whatever reason decide that they don't want them after all.

The complaints focused generally on two things. First, customers noticed that sections of the iPhone screen—a strip of space along the top or bottom of the screen—had stopped responding to touch input. Second, others reported problems with the AC power adaptor and the iPhone's ability to charge. Actual numbers are hard to come by, but as far as I've read, we're talking about no more than a dozen incidents so far.

Legal Déjà Vu

This is part of a long-established pattern with high-profile products launched at Apple. Remember if you will, the pocket-sized kerfuffle in 2005 over the scratch- and crack-prone screens in the first-generation iPod nano, which fueled a batch of class actions that, as I opined at the time, did little more than enrich the lawyers involved.

Basically, the pattern goes like this: Apple unveils a product at a high-profile event, often complete with an appearance by celebrity CEO Steve Jobs. The product hits the market, and reviewers fall all over themselves to praise it, with varying levels of mild criticism thrown in just to make the reviews look balanced. Consumers buy, and Apple declares success in a press release or earnings report revealing how many of this or that thing were sold. Then come the complaints, and often the lawsuits. Already the iPhone's battery—the one that can't be removed by the iPhone's owner and only holds a full charge through 400 charge cycles—is the subject of at least two class actions.

Complex Construction

But let's talk about these screens with the so-called dead zones for a minute. The touch-sensitive screen is easily the most advanced feature on the iPhone and the one thing that truly sets it apart from everything else on the market. Apple owns the patents to the multitouch technology that allows the device to respond when touched by two fingers at once (see BusinessWeek.com, 3/15/07, "Apple's Magic Touch Screen"), and the company that makes it for Apple is a German concern called Balda (see BusinessWeek.com, 4/5/07, "Balda: The iPhone's German Accent").

It's a very complicated piece of gear. I talked with Andrew Rassweiler, Teardown Services manager at market research firm iSuppli, and David Carey at Portelligent, both of whom have taken iPhones apart to see how they're built (see BusinessWeek.com, 7/2/07, "Taking the iPhone Apart").

The iPhone screen is built in layers. The rugged outer glass layer that you touch is backed by a second layer of glass that interfaces with the touch sensors. And right underneath that is the liquid-crystal display portion that actually shows the images. And here the LCD glass is fused to the touch sensor layer, which looks like mesh. (When you hold the iPhone at an angle to a light, you can see it.) "I don't know exactly how they were manufactured, but no amount of prying or scraping could get them apart," says iSuppli's Rassweiler.

Proper Perspective

Getting the screen built involves multiple steps and several companies. Balda and now a second company, Wintek, based in Taiwan, supply the touch screen portion. (A third is being qualified, or so I hear, to help ramp up production.) The LCD portion comes from Epson, with Toshiba Matsushita Display Technology and Sharp Electronics serving as second sources. All of these parts are shipped to a factory in China run by Japanese firm Optrex, a unit of Asahai Glass, which assembles all the parts into the final display module. This module is eventually shipped to Hon Hai Precision Industry, aka Foxconn, which assembles the whole iPhone.

Attached to the screen module, to one side, are two chips, one from Broadcom (BRCM) and one from NXP Semiconductor, that interpret the touch input from the screen. Both Rassweiler and Carey say that if they were to guess at a possible location of a potential problem, it might lie in the connection between these chips and the sensor mesh.

But let's put it in perspective: The available evidence suggests that fewer than a dozen iPhone owners have reported any problems, though it certainly seems possible that there may be more people who have experienced some iPhone troubles.

Cause for Concern?

Even if we were to assume that for every person who has posted about problems on a Web forum there were 1,000 more, the total number of glitchy iPhones would still be in the ballpark of 1% of the 1 million iPhones Apple says it will sell by the end of September. And as yet there is no reason to believe the problem rate is anywhere near this high.

So is 1% an acceptable failure rate for a new device with a lot of new technology? Yes (unless you happen to own one). ISuppli's Jagdish Rebello tells me that it's not uncommon in the wireless industry to see failure rates on new products as high as 3% and 4%, especially when the product is entirely new or, as in Apple's case, the company is building its first phone.

What's important is that the failure rate goes down over time. As products mature, and the understanding of the various pitfalls in the manufacturing process improves, Rebello says, the failure rate drops in most cases to 1% or less. We don't know the actual failure rate on the iPhone. Apple isn't in the habit of releasing such data, mainly because it's not material to earnings. Apple's spokesperson declined to comment on the subject.

But one would have to believe that if there is a problem, Apple is doing what companies in this position always do: Figure out what it is and fix it. We on the outside are forced to simply speculate, and in some cases overreact.

Hesseldahl is a reporter for BusinessWeek.com.

I found this at

http://www.businessweek.com/technology/content/aug2007/tc20070822_235729_page_2.htm