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Tuesday, July 13, 2010, 07:35 am PT (10:35 am ET)

Growing attention on iPhone 4 signal issues presents risk for Apple

A continued focus on antenna issues associated with the iPhone 4, following this week's update from Consumer Reports, could create a risk for Apple, one prominent Wall Street analyst believes.

Shaw Wu with Kaufman Bros. said in a note to investors Tuesday that iPhone 4 demand is still strong, but growing attention on the iPhone 4 antenna could be a concern for Apple. He said checks with supply chain sources have indicated that Apple is having difficulty keeping up with strong demand for its latest phone.

"So far, in our supply chain and industry checks, we have not seen any change in build plans or demand patterns and thus we are not changing our estimates looking for 7.5 million iPhones in the June quarter and 40 million in (calendar) 2010," he wrote.

He continued: "Should this antenna issue become a bigger deal, there could be risk to our as well as consensus iPhone estimates."

As he previously expressed, Wu continues to believe that it would be a simple and relatively inexpensive fix for Apple to discount or give away free bumper cases to relieve the antenna issue. The Apple-branded protective cases prevent users' skin from touching the external metal band on the iPhone 4, which also serves as the device's antennas.

The bumper cases retail for $29, and Apple has said that using them, or any other third-party case, will improve reception issues that users experience when improperly holding the iPhone 4. The issue is caused by touching or covering the gap between the two antennas on the device, found on the lower left side of the handset.

As exclusively reported by AppleInsider earlier this month, Apple gave at least one business free bumpers to fix their iPhone 4 reception issues. The cases were promised on the day the handset launched. Since then, the company allegedly sent a memo to its AppleCare employees, explicitly stating that the company is not "appeasing customers with free bumpers."

Consumer Reports on Monday did a 180-degree turn on its opinion of the iPhone 4, stating that it cannot recommend the device to potential buyers due to reception problems that are a result of the design of the handset. Earlier this month, the nonprofit organization took the opposite stance and said there was "no reason" not to buy an iPhone 4, as they were unable to recreate the widely reported signal loss issues.

Consumer Reports revised its stance after it completed more thorough testing of the iPhone 4 inside a controlled radio frequency isolation chamber. The test used three separate iPhone 4 handsets purchased in New York, and found that only those devices — and not the iPhone 3GS or Palm Pre — experienced signal issues.

Earlier this month, Apple admitted that the iPhone 4 calculates bars of signal strength incorrectly, and a software fix is expected to be delivered in the coming weeks. Apple's iOS allots nearly 40 percent of its total possible reception levels to five bars, from -51dB to -91 dB. But the distance from four bars to one bar of reception is much less, from -91dB to -113dB. But the fix will not address the hardware issues found with the device.