Apple said to have found defect in watch part, WSJ reports

NEW YORK (Bloomberg) - Apple Inc. is said to have found a defect in a key component of its watch during production, forcing the company to limit supply of the new device, the Wall Street Journal reported, citing anonymous sources.

The issue is in the taptic engine of the watch, which mimics the sensation of being tapped on the wrist, the newspaper said Wednesday. Apple declined to comment on the report.

Apple is rushing to boost inventory of the watch, chief financial officer Luca Maestri said April 27 in an interview. "We are working very, very hard to catch up from a supply standpoint - keep in mind this is not only a new product but it's an entirely new category," he said.

Tests of the watch found a reliability issue with the part made by AAC Technologies Holdings Inc., one of the two suppliers for the taptic engine, the newspaper said. Parts from the second supplier, Nidec Corp., weren't having the same issues.

AAC fell as much as 9.4 per cent, the most intraday in more than a month. The shares traded at HK$41.80 as of 9:58 a.m. in Hong Kong, a 3.9 per cent decline from Wednesday's close. Nidec gained as much as 1.1 per cent before changing hands at 9,126 yen, a 0.5 per cent advance on the day, in Tokyo trading.

The introduction of the watch, which has a touch-screen display and works in tandem with a user's iPhone, has been in stark contrast to typical rollouts of Apple products, when buyers have lined up outside stores for the chance to get the new devices on the first day.

Angela Ahrendts, Apple's retail chief, had told employees that tight inventory and high demand meant the watch initially wouldn't be available for sale in company stores and urged workers to send shoppers online to make a purchase.

Customers have been able to schedule demonstrations in Apple's stores since April 10, when online pre-orders began. Shipment times quickly pushed past the official release date of April 24, with some customers promised delivery as late as June, depending on the version of the watch they purchased. Apple has sent messages to some buyers that their orders would be shipped earlier than expected.

A snafu with the watch's components would follow a supplier issue with Apple's larger-screened iPhone 6 and 6 Plus introduced last year. The phones were expected to have display screens made of sapphire, but Apple's supplier GT Advanced couldn't meet the requirements. The supplier filed for bankruptcy in October.

The new iPhones without the extra tough screens went on to fuel record sales globally, helping boost revenue in China by more than 70 per cent last quarter.

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