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Apple denies creating artificial product shortages for hype

post #1 of 42
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Apple does not purposely create artificial product shortages to garner free press and generate hype among consumers, executives with the company said during Tuesday's quarterly earnings conference call.

Speaking to analysts and members of the press following the release of the company's quarterly earnings report, Chief Operating Officer Tim Cook said Apple does not intentionally build a small number of units to generate hype. Gene Munster with Piper Jaffray prompted the discussion when he asked Cook why Apple is always running out of products after a launch.

"We do not purposely create a shortage for buzz," Cook said, adding that all of the company's suppliers are working hard to fulfill orders.

Apple has been faced with a shortage of iPhone 4 units after its launch in late June, and Cook said that the company has struggled to keep up with demand. "We are selling every unit we can make," he said.

The case was different with the iPad, though, which was a new product category where Apple was unsure how many they would sell. Apple initially planned to make a million iPads per month, a number that Cook said was far more aggressive than most believed Apple could sell in the first year.

The company announced Tuesday that it has already sold 3.27 million iPads since the device went on sale. But Apple was simply caught off-guard by the demand for the iPad, Cook said.
post #2 of 42
Quote:
Originally Posted by AppleInsider View Post

Apple does not purposely create artificial product shortages to garner free press and generate hype among consumers, executives with the company said during Tuesday's quarterly earnings conference call.

What happened to the response "are you nuts?". That seemed like a better answer to the suggestion that Apple creates a shortage for hype. They are having to crank out 1 million phones a week. That's hard for any single company to maintain.
post #3 of 42
Quote:
Originally Posted by AppleInsider View Post

Apple does not purposely create artificial product shortages to garner free press and generate hype among consumers, executives with the company said during Tuesday's quarterly earnings conference call.

Speaking to analysts and members of the press following the release of the company's quarterly earnings report, Chief Operating Officer Tim Cook said Apple does not intentionally build a small number of units to generate hype. Gene Munster with Piper Jaffray prompted the discussion when he asked Cook why Apple is always running out of products after a launch.

"We do not purposely create a shortage for buzz," Cook said, adding that all of the company's suppliers are working hard to fulfill orders.

Apple has been faced with a shortage of iPhone 4 units after its launch in late June, and Cook said that the company has struggled to keep up with demand. "We are selling every unit we can make," he said.

The case was different with the iPad, though, which was a new product category where Apple was unsure how many they would sell. Apple initially planned to make a million iPads per month, a number that Cook said was far more aggressive than most believed Apple could sell in the first year.

The company announced Tuesday that it has already sold 3.27 million iPads since the device went on sale. But Apple was simply caught off-guard by the demand for the iPad, Cook said.

Its not a shortage...its just the demand is so large...I think its hard to judge this
post #4 of 42
I believe him but what would we expect him to say if they DID intentionally create the shortages to build hype. Yeah we do it?
post #5 of 42
They sell frackin' millions of devices in a typical month. It's hard to build much more.
post #6 of 42
Consider the source of how this discussion started.

That explains it.
post #7 of 42
You see, I've been trying to tell you all this time. iFraudsters! Ripping us off versus the superior Android technology out there. Now let me find the camera app for my phone... I'm sure it's on the marketplace somewhere.
post #8 of 42
What kind of moron thinks any company wouldn't want to make as much money as possible?
"I want an iPad!"
"No! Your money is worthless! It's media attention I want!"
"Yeah, but you'll get media attention anyway. You're Apple!"
"I don't care! I don't want to make money!"
post #9 of 42
Quote:
Originally Posted by bspears View Post

I believe him but what would we expect him to say if they DID intentionally create the shortages to build hype. Yeah we do it?

Its a stupid concept developed by stupid idiots online.

If nobody is interested in a product, limited supply is meaningless.

If everybody wants a product, why limit supply to create demand that's already there? You're just working against yourself, hurting potential sales and creating a vacuum for someone else to fill. There's no upside. This is basic business and economics, which tech journalists seem to lack the wits for.

But trolls and peasants always want to see drama in every corner so they're always busy inventing little conspiracies. It gives their otherwise boring life meaning if there's an imaginary super-villain or illuminati group working toward their demise.
post #10 of 42
Maybe they mistook Apple for Nintendo.

Of course, this really is a stupid mistake to make, seeing as Nintendo ship technology from the past where as Apple ship technology that others copy in the future.
post #11 of 42
Yeah that's true about Nintendo. They suffered shortages for about 3 years on their Wii. Oh well. Apple will crank them out soon enough. Now about those white iPhone 4 models...
post #12 of 42
Quote:
Originally Posted by JimDreamworx View Post

Consider the source of how this discussion started.

That explains it.

According to the article, "Gene Munster with Piper Jaffray prompted the discussion when he asked Cook why Apple is always running out of products after a launch."

Did anyone specifically ask whether Apple purposely creates shortages, or did Cook offer that response on his own? And isn't Gene Munster considered one of the more respectable analysts when it comes to Apple?

Also, certain memory manufacturers have admitted to price fixing. It is not unreasonable to ask about supply fixing.
post #13 of 42
Quote:
Originally Posted by irnchriz View Post

Maybe they mistook Apple for Nintendo.

Of course, this really is a stupid mistake to make, seeing as Nintendo ship technology from the past where as Apple ship technology that others copy in the future.

gonna say this is kinda trolly,

but how was the NDS, NDSI, and NDS3D taken from someone else?

how was the Wii on that hand?

(on topic now)

if Apple estimates they will sell 9.5m ip4's in the June and September quarters (http://www.appleinsider.com/articles...ey_driver.html)
why would you expect them to have made more then 3 million for the first 3 weeks of the launch... when this is a third of what was estimated for the first few months of its release....

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post #14 of 42
Quote:
Originally Posted by oxygenhose View Post

Its a stupid concept developed by stupid idiots online.

If nobody is interested in a product, limited supply is meaningless.

If everybody wants a product, why limit supply to create demand that's already there? You're just working against yourself, hurting potential sales and creating a vacuum for someone else to fill. There's no upside. This is basic business and economics, which tech journalists seem to lack the wits for.

But trolls and peasants always want to see drama in every corner so they're always busy inventing little conspiracies. It gives their otherwise boring life meaning if there's an imaginary super-villain or illuminati group working toward their demise.

Then how do you explain Apple's pricing strategy for their Mac computers, and their refusal to build the so called "mid range minitower" that so many people want? Doesn't Apple want to sell Macs to people who are interested in buying them? Isn't Apple just "working against themselves" and "hurting potential sales", as you put it?

But the typical response when it comes to Mac models and pricing is the inevitable car analogies and comparisons of Rolls Royce vs Pinto, how BMW doesn't care if not everybody gets to have one of their cars, etc.
post #15 of 42
LOL. Piper Jaffray = IDIOTS. Just sayin'

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post #16 of 42
Quote:
Originally Posted by oxygenhose View Post

Its a stupid concept developed by stupid idiots online.

But trolls and peasants always want to see drama in every corner so they're always busy inventing little conspiracies. It gives their otherwise boring life meaning if there's an imaginary super-villain or illuminati group working toward their demise.

If that's what you need to believe in order to justify your Kool Aid induced fantasies.
post #17 of 42
Quote:
Originally Posted by Blackintosh View Post

If that's what you need to believe in order to justify your Kool Aid induced fantasies.

So let me clarify a bit. Are you suggesting that it is reasonable and logical to assume that Apple intentionally limits supply, and thus reduces sales... But it is 'drinking the koolaid' to belileve that they build and ship as fast as they can? That's certainly what it sounds like you are suggesting, given the context.
post #18 of 42
Quote:
Originally Posted by Haggar View Post

According to the article, "Gene Munster with Piper Jaffray prompted the discussion when he asked Cook why Apple is always running out of products after a launch."

Did anyone specifically ask whether Apple purposely creates shortages, or did Cook offer that response on his own?

I'm not sure that was what Mr. Munster had in mind. My guess is that he was remarking on the conservative nature of Apple's "build" policies.

And that's a good question. When they begin to ramp up, they must make a guess on how many to build. We know that for the iPad and the iPhone 4 that guess was way off towards the conservative end.

Is Apple being just a tad too careful about not overbuilding for its launches of late? It kind of falls into step with their overly conservative guidance.

And if Apple is guilty of being too conservative on its builds, isn't that kind of purposefully creating a shortage?
post #19 of 42
Quote:
Originally Posted by Sacto Joe View Post

... And if Apple is guilty of being too conservative on its builds, isn't that kind of purposefully creating a shortage?

No.

And your assumption is that they are being conservative. Another possibility is that these products just can't be slam bang mass produced at whatever quantity anyone might want to name. The latter seems more likely.
post #20 of 42
Quote:
Originally Posted by anonymouse View Post

No.

And your assumption is that they are being conservative. Another possibility is that these products just can't be slam bang mass produced at whatever quantity anyone might want to name. The latter seems more likely.

This claim from Apple detractors that Apple is deliberately creating iPad shortages is the funnies thing ever!

Initially, these same people were claiming that it was just a "large iPod Touch" and no one will buy it. Those same people who were saying it wouldn't sell, and would be Apple's next Cube, are now slamming Apple for not being able to predict that it would be the fastest selling consumer device, EVER! (only to probably be overtaken by the iPhone).
post #21 of 42
From a purely business perspective it does not make sense to satisfy the entire demand for a given product on the day of announce. Not only would that mean either a much larger manufacturing capacity or a huge stockpile before announced. Either way can you imagine the bad press Apple would get if it either A. Manufactured 10 million iPhones a day and sold only 9 million on the first day, and only 8 million on the second day and only 7 million on the next day etc etc - until they had sold 45 million units - and had a stockpile of 40+ million with no buyers or B. Had manufacturing capacity for say 1 billion units a year but only sold 1 million a year? There is also something to be said for ramping up production and learning from early units to improve later units. Imagine the questions that would be asked if 100 million units had been available on day one and they all had a defect like a bad antenna that required $ to fix.

There are plenty of examples from every industry for example a car company that builds a plant to make 1 million units of a given model a year and cannot sell 50,000 the year the plant opens.

Or imagine if the manufacturing was such that any design change had to remain in production for 4 years because the tooling was too expensive to change any more often than that.

Also - consider the flip side - if the initial shortage was designed simple to generate heightened demand - what would be the value in perpetuating that shortage? If they were artificially limiting production - they could more readily adjust product to match demand to keep the supply only just a hair under demand to keep an edge but not to create any ill will for lack of availability.

Maybe they should be more like Google with the Nexus One - and make several times more units than anyone wants to buy and then shut down the phone business altogether (or insert which ever product line you want here).

I am just amazed that they manage to get anything built at all - the logistics of dealing with multiple component suppliers and manufacturing and shipping etc - and dealing with the rules and regulations of dozens of countries.

I have heard that perception is reality but so must be mis-perception.
post #22 of 42
Quote:
Originally Posted by Sacto Joe View Post

Is Apple being just a tad too careful about not overbuilding for its launches of late? It kind of falls into step with their overly conservative guidance.

And if Apple is guilty of being too conservative on its builds, isn't that kind of purposefully creating a shortage?

Do you really think a million per month is too conservative to the point of guilt? Hindsight is easy, would a sane person really think that in foresight?

Let's give some credit where it is due here. Tablets were a tough sell, they've been around for over a decade and a half. No one else has been able to get wide consumer acceptance, it was the domain of enthusiasts and a few professional niches. I recall analysts have pegged the combined market for tablet computers this year to be about 3-3.5 million. Apple has already hit that ballpark with just their own product in only three months, and there are still just over five months left in the year. With more still rolling out in new countries. I would hate to be involved in the logistics of keeping production lines supplied.
post #23 of 42
Quote:
Originally Posted by Marvin View Post

What happened to the response "are you nuts?". That seemed like a better answer to the suggestion that Apple creates a shortage for hype. They are having to crank out 1 million phones a week. That's hard for any single company to maintain.

Correct. Now imagine having to crank out 52 million iPhones, per year. That would require new manufacturing. Perhaps the US should see an opportunity to bring it home?
post #24 of 42
... it's not just a river in Egypt.
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post #25 of 42
Well, Apple doesn't "officially" create product shortages, but they continually underestimate consumer demand at every single product launch which is basically the same thing. Had they waited to launch the iPhone 4 another month everyone would have received one.
post #26 of 42
Quote:
Originally Posted by mdriftmeyer View Post

Correct. Now imagine having to crank out 52 million iPhones, per year. That would require new manufacturing. Perhaps the US should see an opportunity to bring it home?

I really wish people would stop with the "Apple should just start manufacturing in the U.S." stuff.

I believe strongly in U.S. manufacturing and do my best to buy American (I paid over 3x for a patio table to get an American one. I spent weeks looking for a good American fishing rod. I quit a job because it was clear that upper management was driving for us to import everything from China). But it's not an arbitrary decision to manufacture in the U.S. A company can't just say "we're going to manufacture in the U.S.").

The entire infrastructure is stacked against U.S. manufacturing. Materials costs are higher here. Labor is vastly higher (even non-union shops. If you've got Union employees, the difference is astronomical). Environmental laws drive up the price. Legal issues. Insurance costs. Taxes. Rent. Everything is much, much higher in the U.S. Exchange rates favor imports. For some products, manufacturing in the U.S. could double your costs - or more.

There are a few businesses where it can make sense - if you manage it properly. But for something like a phone being manufactured in the tens of millions, it's not going to happen - until the infrastructure changes. Write to your Congressman and Senators. Where you can, buy American. And stay away from Walmart (about 1/2 of everything on their shelves is imported, most of that from China).

If the playing field is leveled, there's a chance for U.S. manufacturing to make a comeback. But in the current environment, it's suicide for most high volume consumer goods manufacturers.
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post #27 of 42
Working for AT&T I can tell you making artificial demand, Would not be a good idea, iv seen customers been talked in to other phones due to fear of a 3 week wait. Esp the one who have a damaged phone and need something now
post #28 of 42
Droid X's are sold out. Someone give Piper Jaffray Motorola's phone number.
post #29 of 42
It's hard to believe some jackass would seriously ask a question like that and even expect an honest answer. A lot of companies must be trying to create a lot of hype lately. Even the Android smartphones (HTC EVO and DroidX) are experiencing delays so that must mean that are trying to copy Apple by creating more product hype. What company would be stupid enough to hold back products when people are standing there with cash in hand? I must admit, iHaters are a truly stupid breed of humans.
post #30 of 42
In my opinion, there is no reason why there should be a shortage. Apple can simply release the phone later in the year when they have produced enough to supply the demand. Instead, it chooses to release the phones when it hasn't produced enough. If the white iphone is not available until a month after the other iphone is released, it shouldn't be announced. That is hype, artificial hype. But that's what apple does and what makes it so successful.
post #31 of 42
Quote:
Originally Posted by Sacto Joe View Post

And if Apple is guilty of being too conservative on its builds, isn't that kind of purposefully creating a shortage?

I don't think so. Manufacturing capacity is expensive, and I'm sure Apple's manufacturers will have clauses in the contracts that holds Apple to buying a certain number per month so they can justify the capital spend to make that capacity. If Apple planned to build way more than they could sell, they would end up with a bunch of product sitting in warehouses that has to be written down in the accounts each quarter.

Along with that, Apple are more than likely to base their capacity requirements on what they think the ongoing demand will be, not the demand in the first few weeks/months when demand is bound to be higher than an ongoing basis. There is no point in paying a fortune to have capacity for say, 5 million phones per week, if that's only going to be the demand for the first 4 weeks, then demand is going to be 1 million per week. You'd then have capacity to build 4 million per week sat doing nothing - very wasteful.
post #32 of 42
Quote:
Originally Posted by eehd View Post

In my opinion, there is no reason why there should be a shortage. Apple can simply release the phone later in the year when they have produced enough to supply the demand. Instead, it chooses to release the phones when it hasn't produced enough. If the white iphone is not available until a month after the other iphone is released, it shouldn't be announced. That is hype, artificial hype. But that's what apple does and what makes it so successful.

I don't want to repeat what I wrote just above, but this is similar to just producing too many. Once you've made something, you've effectively paid for it and if it's just sat on a shelf, it's like having money under the mattress rather than in the bank earning interest (though I concede I'd be better off had I stuck my money under the mattress over the past 3 years!)
post #33 of 42
Apple is lying or else must be the worst supplier ever seen. If Apple is not creating artificial shortages why do they release it much later in other countries and start of with a handful of copies. In Belgium only a few could get a hand on the iPhone 3G and 3GS for months, so why not start selling when you have enough supply. You should think Apple would have learned from previous rollouts but no, again in Belgium there will be only a very limited supply of iPhones available. In the Netherlands the pre-sale was already halted after a few hours which just shows Apple is doing the same shit as they did with previous releases! The iPhone is the only product that I know that get's rolled out in such small quantities except for limited edition stuff.

If we can't even order an iPhone 4 how would they know how much they need to build.
post #34 of 42
If they're not creating shortages, then explain this. Forget the major products....why is a company with the resources (read cash) of Apple UNABLE to keep SIMPLE accessories available? Even from the Apple store (online) there are intolerable delays in Apple iPad cases and camera connector kits!!!

I'm an SPR certified Apple Specialist and my store has seen 3 cases and five connector kits (before this week)

UNBELIEVABLE!!!

Frankrac
post #35 of 42
Quote:
Originally Posted by eriamjh View Post

they sell frackin' millions of devices in a typical month. It's hard to build much more.

amen!!!
post #36 of 42
Quote:
Originally Posted by jragosta View Post

The entire infrastructure is stacked against U.S. manufacturing. Materials costs are higher here. Labor is vastly higher (even non-union shops. If you've got Union employees, the difference is astronomical). Environmental laws drive up the price. Legal issues. Insurance costs. Taxes. Rent. Everything is much, much higher in the U.S. Exchange rates favor imports. For some products, manufacturing in the U.S. could double your costs - or more.

I guess for the cars Toyota, Honda, etc. make, the costs must be *really* prohibitive in Japan (although they also have shipping it across the Pacific Ocean). My Ford/Mazda is made in Michigan, but mostly because it's really a Ford Fusion tricked out right (unlike a Pontiac G6 I drove recently). Remember, folks, *Japan* is also sending a bunch of manufacturing to China, too.

One of the oddly Apple kept secrets is their pre-shpping product testing (and, yes, you folks with the DOA units wonder about it). If they could be more like Dell (no post assembly testing), they could shovel junk like they do out the door in greater volume.

While on the subject of phones, why are U.S. analysts projecting increased sales if Apple adds someone else other than AT&T? If they aren't producing enough *now*, how could they fill that *additional* demand?!
post #37 of 42
Apple has never produced an overstock of anything in the past 13 years.

Quote:
Originally Posted by PaulMJohnson View Post

I don't want to repeat what I wrote just above, but this is similar to just producing too many. Once you've made something, you've effectively paid for it and if it's just sat on a shelf, it's like having money under the mattress rather than in the bank earning interest (though I concede I'd be better off had I stuck my money under the mattress over the past 3 years!)
post #38 of 42
The trouble with conspiracy theories is that they are not logical so there is no way to refute them.

And how many products is Apple currently selling vs how many have 4 week lead times?

And where is the data on how long after product launch before lead times shrink to 3 days?

and where are those who believe artificial constraint on the day that whichever product reaches a 2 to 3 day lead time apologizing for being wrong?

And what about folks concerned about pay rates and suicide rates in Chinese factories? what if double the production meant a 50% pay cut for all workers and resulted in a 20% increase in suicides? would you then be thanking Apple for supplying your demand for what is a luxury item? or at least a luxury version of what has become a necessity for many?

And regarding launch date vs available units and other countries etc. Perhaps Apple should announce the product the day the first component starts down the assembly line and then suppose they can produce 60,000 units a day - then you would have a week before the first unit shipped and only 180,000 sold in the first 3 days.

Whereas what they really did was likely more along the lines of 60,000 a day for 30 days leading up to launch day meaning 1.8 million available on day one (including demo units for the stores etc) and 1.7 million sold on day one - but then only 60,000 a day thereafter - or 21 million or so in a year - perhaps with plans to ramp up production as demand is gauged and for availability in more countries.
post #39 of 42
I believe it for the iPad, but for other products like iPods back in the day and maybe the iPhone4 now I think the shortages are fake.
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post #40 of 42
What a stupid question.

I would understand if Apple made, let's say, 350 iPads over the course of 6 weeks when they know they have at least 3 million drooling customers. That would definitely be "under-estimating demand."

When they're cranking out 3.5 million iPads, does the fact that 4 million people want them constitute artificially-created demand?
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