2 Things That Could Hold Back the iPhone 5

Apple's (NAS: AAPL) fancy new iPhone 5 has some high expectations. We've already seen analyst estimates that range from 10 million units in 9 days, 60 million units in 100 days, or 250 million throughout the product's life cycle.

Those are all high bars to clear for a device that investors are counting on to boost Apple shares to new heights. However, there are a couple potential obstacles that could stand in the way of its success, buried within its supply chain.

1. Baseband processors
Apple taps Qualcomm (NAS: QCOM) for baseband processors. Qualcomm taps Taiwan Semiconductor Manufacturing (NYS: TSM) for manufacturing services. All year long, Qualcomm has been faced with supply constraints from TSMC related to its 28-nanometer manufacturing process, the same one used to fabricate Qualcomm's newest baseband chips, as well as its latest and greatest Snapdragon application processors.

A couple of months ago Qualcomm had reportedly tapped additional suppliers in order to help overcome these constraints, including United Microelectronics (NYS: UMC) and Samsung, because it had been relying on TSMC for over 90% of its capacity, and a little bit of diversification could go a long way.

Source: Apple.

These chips are critical ingredients to the iPhone 5, serving up the LTE using one chip that includes both voice and data capabilities. TSMC had even reportedly turned down billion-dollar exclusivity contracts from both Apple and Qualcomm because it apparently has commitment issues, and doesn't want to be tied down.

If these 28-nanometer baseband chips are hard to come by for any of these reasons, the iPhone 5 could see supply constraints.

2. In-cell display
Apple has been focusing heavily on cutting-edge screen technology for the past several years. The pixel-packed Retina display on the iPad 3 was a source of supply constraints on that device, and demand has far outstripped supply for the new models. It turns out that the iPhone 5 may similarly see some supply constraints related to its display.

Source: Apple.

The iPhone maker is using in-cell display technology, one major contributing factor to making the device so thin. By integrating the touch sensors directly into the LCD display, it eliminates the need for a separate layer of electrodes. Apple is tapping three different suppliers for these panels: Sharp, Japan Display, and LG Display (NYS: LPL) .

LG Display CEO Han Sang-beom has already expressed confidence that his company can "supply the panels without any fail," referring to in-cell as the latest development in the industry. The Wall Street Journal reports that Sharp has just now started shipping these displays after seeing weeks of delays related to manufacturing hurdles. That coincides with Sterne Agee analyst Shaw Wu's sentiments, who fears that fourth quarter iPhone upside might be "limited by supply constraints on new in-cell touchscreens."

These display panels could be an additional source of production bottlenecks.

Just because they can, doesn't mean they will
This will be the fastest iPhone 5 rollout ever for Apple, which means it's going to need a massive amount of units to accommodate demand in all of its launch countries. Contrary to popular belief, Apple is indeed mortal, and bleeds like anyone else, and can also be affected by supply constraints due to factors out of its control.

Cook is an operational genius, and you can bet that he's coordinated every moving piece of Apple's supply chain puzzle down to the finest detail as best he can, but sometimes, things can happen. I'm fairly optimistic that any supply constraints Apple faces will be short-lived, but if they rear their ugly heads, one or both of these critical components would be the likely culprits.

By now, your interest in iPhone component suppliers may be piqued. If so, you're in luck, because I've put together a comprehensive iPhone 5 report on all the likely suppliers, and how to profit on Apple's new flagship device. It's included as a bonus for subscribers of our Apple research service, which also comes with free updates for a year. Click here to sign up today.

The article 2 Things That Could Hold Back the iPhone 5 originally appeared on Fool.com.

Fool contributorEvan Niuowns shares of Apple and Qualcomm, but he holds no other position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Apple and Qualcomm.Motley Fool newsletter serviceshave recommended buying shares of Apple.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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