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Supply issues persist for Apple weeks after disaster in Japan

post #1 of 27
Thread Starter 
More than a month after a deadly earthquake and tsunami struck Japan, the longterm effects on Apple's supply chain are becoming clearer, with report characterizing them as "significantly damaged."

Japan's supply of components for the iPad 2 remains greatly affected by the disaster, DigiTimes reported Wednesday. Apple has reportedly shifted orders for iPad 2 connectors to Taiwan's Cvilux.

Previously, Apple depended on Japan's Hirose Electric for most of its iPad 2 connectors. But since the tsunami and earthquake, Japan has had a power brownout policy that left the company unable to meet demand for Apple.

As a result, Apple has instead turned to Cvilux for iPad 2 connectors, industry insiders reportedly said. The major order from Apple is expected to boost Cvilux to greater profitability.

In March, a report from Wall Street analyst Gene Munster of Piper Jaffray said that the disaster in Japan had not "meaningfully impacted" Apple's iPad 2 supply. Wednesday's latest report of connectors being secured from Taiwan could suggest that Apple has sidestepped potential issues from the disaster, turning elsewhere for components to keep building more iPad 2 units.

Other key iPad 2 components said to come from Japan include NAND flash from Toshiba Corp, DRAM from Elpida Memory Inc., an electronic compass from AKM Semiconductor, touchscreen overlay glass believed to be from Ashai Glass Co., and system batteries from Apple Japan Inc.

Apple has also reportedly become more aggressive in securing components since the disaster in Japan. One report earlier this month claimed that Apple was offering upfront cash payments to suppliers in order to secure components. It was also said that Apple was willing to agree to price hikes for components to ensure supply.

Demand for the new iPad 2 continues to outweigh supply, though Apple continues to expand retail availability of its second-generation touchscreen tablet. Just this last week, the device went on sale at some locations of U.S. retailer Toys R Us, and the iPad 2 is also expected to go on sale in Hong Kong, Korea and Singapore this month.
post #2 of 27
And this is the moment where Tim Cook shows his value. Managing a chaotic supply chain is precisely where his genius matches Jobs'.
post #3 of 27
I think some of the analysts expecting good margins this quarter are going to be in for a surprise. Apple appears willing to reduce margins to keep the volume up.
post #4 of 27
When they change multiple suppliers for various parts at will, how does this affect the overall quality of those iPads?
post #5 of 27
Quote:
Originally Posted by iMoan View Post

Even better. Now lets take the tragedy in Japan and turn it into a praise fest for Apple. Yes, Tim Cook will work his magic and persuade devastated quake victims to "get back to work" on the iPad.

Praise is a strong term. And it's less about Apple goading japan companies to meet their expectations than it is all those 'back benchers' who couldn't meet Apple's cost/delivery expectations are going to be pressed on to shine. The question will be, how much hit on component cost will Apple hit to meet demand AND/OR the expectations of the investors. That's an interesting balancing act.

The assumption is that Cook has a BCP plan that is approved by the board and is running with it. Apple is not about innovation (and yes, that may be too strong a word for it), as much as it is, _EXECUTION_. This isn't about steve boarding a plane and flying into Tokyo and kicking butts, as it is Tim picking up the phone and issuing the command 'Plan B.' at least that's how (us) investors are hoping.
post #6 of 27
The linked article doesn't say that Apple's supply chain was "significantly damaged" by the earthquake. It says that Japan's supply chain is what's been "significantly damaged." It also does not report that the supply of parts for the iPad are "greatly affected," only that Apple has been finding other suppliers for those parts.

Other than that, the article seems to be accurate.
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post #7 of 27
Quote:
Originally Posted by TheFatWookie View Post

When they change multiple suppliers for various parts at will, how does this affect the overall quality of those iPads?

+1
as said above, Tim Cook is doing a great job, and it's not like they're not going to be fitting round pegs in square holes, but this is my biggest concern - are the new components identical? if so, can they insure QC when a facility is retooled this fast to produce a new spec? if not, what are the implications?

as for reducing profit margins to keep quantity up, i think it's far better than the alternative. get as many people buying from the app store as you can as fast as possible - that's where the big money will made.
post #8 of 27
They're still like rocking-horse shit here in Denmark as well.
I ordered one, a week after they were launched in Denmark, from an Apple supplier here in Århus (Denmark's second city). They only sell Apple stuff. Nothing else.
Three weeks later, they still haven't got me my iPad. What's more; they haven't the faintest idea when they get new deliveries, how many, or which model.
I contacted their head office in Copenhagen and the guy said that one week they got 400 units, the next just 40. I am currently 136 in line for a black, 32Gb, Wi-Fi model. But, as I said, they have no idea when I'll get it. Could be tomorrow, could be next month.
There are two other retailers here selling them. Same story.
How on earth can you run a business with a supplier like that?
Who (and where are they) is it that's deciding how much and which models we get? Some guy in some port somewhere in the far-east who's throwing them into containers to various countries? Certainly it seems like Apple have washed their hands of the whole problem.
And it just rubs salt in the wound to see reports that KidsRUs are now beginning to sell them in the US.
Us loyal Apple customers can go take a long walk off a short pier, by the looks of it.
post #9 of 27
Quote:
Originally Posted by TheFatWookie View Post

When they change multiple suppliers for various parts at will, how does this affect the overall quality of those iPads?

The real question is: how does this affect: cost of manufacturing (increase in component cost + internal QA rejections), and cost of under warranty replacements, and opportunity loss costs (someone buys another device because they can't wait for apple to quench the delivery channel... most important in country roll-outs... when will elbonia get iPad2s, and will people give up and buy a Xoom/Tab/Playbook in those regions?

we probably won't know th impact until July. Hopefully by then the Japanese capacity will be back online.

It would seem to me the biggest issue is power. Even back online, the cost of commerical power (MWs per day) have got to go up in Japan. If they do, will Apple 'be nice' and allow for extraordinary changes in Japaniese supplier prices/unit?
post #10 of 27
Quote:
Originally Posted by iMoan View Post

Even better. Now lets take the tragedy in Japan and turn it into a praise fest for Apple. Yes, Tim Cook will work his magic and persuade devastated quake victims to "get back to work" on the iPad.

Really!? Get over yourself.

Yes, what happened in Japan was horrible, but do you expect the rest of the world to come to a stand still until Japan can get back on its feet.

Also, is the entire country down? WTF! People say, "Japan" and everyone freaks out. Are people a little too damned sensitive or what?

Furthermore, I bet those people can't wait for their lives to get back to normal and get this tragedy behind them. Just as anyone else would.
Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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post #11 of 27
Quote:
Originally Posted by desarc View Post

as for reducing profit margins to keep quantity up, i think it's far better than the alternative. get as many people buying from the app store as you can as fast as possible - that's where the big money will made.

-1: What part of 'ITMS is run essentially break even' don't you understand?

Apple's profits are all about HW. Apple's 'experience' is all about apps. The latter drives the former, and the former is all about margin.

The balance point is how much margin must you sacrifice to retain customer satisfaction (quality and quantity) AND feed the investment monster at the same time.
post #12 of 27
Quote:
Originally Posted by Speesh View Post

They're still like rocking-horse shit here in Denmark as well.
I ordered one, a week after they were launched in Denmark, from an Apple supplier here in Århus (Denmark's second city). They only sell Apple stuff. Nothing else.
Three weeks later, they still haven't got me my iPad. What's more; they haven't the faintest idea when they get new deliveries, how many, or which model.
I contacted their head office in Copenhagen and the guy said that one week they got 400 units, the next just 40. I am currently 136 in line for a black, 32Gb, Wi-Fi model. But, as I said, they have no idea when I'll get it. Could be tomorrow, could be next month.
There are two other retailers here selling them. Same story.
How on earth can you run a business with a supplier like that?
Who (and where are they) is it that's deciding how much and which models we get? Some guy in some port somewhere in the far-east who's throwing them into containers to various countries? Certainly it seems like Apple have washed their hands of the whole problem.
And it just rubs salt in the wound to see reports that KidsRUs are now beginning to sell them in the US.
Us loyal Apple customers can go take a long walk off a short pier, by the looks of it.

I live in Copenhagen, Denmark. I ordered mine in the end of March through the Apple Store and I received an e-mail and SMS yesterday that it has shipped - probably from the UK. So something seems to be happening. At least anything is better than a the November launch of the iPad 1 here in Denmark. That was frustrating...
post #13 of 27
Quote:
Originally Posted by Speesh View Post

They're still like rocking-horse shit here in Denmark as well.
I ordered one, a week after they were launched in Denmark, from an Apple supplier here in Århus (Denmark's second city). They only sell Apple stuff. Nothing else.
Three weeks later, they still haven't got me my iPad. What's more; they haven't the faintest idea when they get new deliveries, how many, or which model.
I contacted their head office in Copenhagen and the guy said that one week they got 400 units, the next just 40. I am currently 136 in line for a black, 32Gb, Wi-Fi model. But, as I said, they have no idea when I'll get it. Could be tomorrow, could be next month.
There are two other retailers here selling them. Same story.
How on earth can you run a business with a supplier like that?
Who (and where are they) is it that's deciding how much and which models we get? Some guy in some port somewhere in the far-east who's throwing them into containers to various countries? Certainly it seems like Apple have washed their hands of the whole problem.
And it just rubs salt in the wound to see reports that KidsRUs are now beginning to sell them in the US.
Us loyal Apple customers can go take a long walk off a short pier, by the looks of it.

Ok, C'mon... Nobody, not even the best of the best could have anticipated the shear volume of "want to have" on the iPad 2 from day 1. I've been on the iphone from day 1, waited in every line, waited in a line here in Los Angeles with well over 1,000 people for ipad2. The lines for ipad2 were the biggest i've seen for ANY apple product launch to date.

What company or product can you or anyone else name that has been able to PRODUCE, DISTRIBUTE and SELL THROUGH this kind of volume OVERNIGHT and STILL have lines at it's stores? This is about POPULARITY and that's a problem EVERY company on this PLANET would love to have Geez.

P.S. You can always cancel and go pick up the INFERIOR other tablets on the market or just be patient and enjoy your ipad once it arrives and it will!

Cheers
post #14 of 27
Quote:
Originally Posted by iMoan View Post

Wow. This is exactly what I said the other day when the forum was attacking Best Buy as bait and switch swindlers and I got not one response from anyone. Guess no one wanted to slow down the Best-Buy-Bash fest.



Even better. Now lets take the tragedy in Japan and turn it into a praise fest for Apple. Yes, Tim Cook will work his magic and persuade devastated quake victims to "get back to work" on the iPad.

Or pre-stocking or arranging alternate sources.
BTW, get off your moral high horse. The earthquake did have economic repercussions that we are allowed to discuss.
post #15 of 27
"Supply issues persist"

"significantly damaged"

These words suggest Apple is having problems. But the article in fact describes how Apple has skirted these problems. Furthermore, the lead time for iPad 2 is shortening and Apple is continuing the geographical coverage of the product.

I'd say the only evidence of supply chain issues is the delay of iPhone5, and even that is not 100% confirmed.

In short, interesting article but grossly misleading headline and lead-in.
post #16 of 27
Quote:
Originally Posted by stelligent View Post

"Supply issues persist"

"significantly damaged"

These words suggest Apple is having problems. But the article in fact describes how Apple has skirted these problems. Furthermore, the lead time for iPad 2 is shortening and Apple is continuing the geographical coverage of the product.

I'd say the only evidence of supply chain issues is the delay of iPhone5, and even that is not 100% confirmed.

In short, interesting article but grossly misleading headline and lead-in.

I suppose I agree sInce I posted almost exactly the same comments three hours ago.
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post #17 of 27
One Japanese manufacturer was publicly discussing the need to open a second factory in the USA in order to insure reliable production worldwide. From memory it was the polymer film mfg for lithium batteries in the last two-three weeks.

Might be nice to see this as a discussion point with all key suppliers. It's becoming rather clear that a lot of the money for iPhone and IPad construction is going to component suppliers in Japan (maybe Taiwan and other places as a guess) and NOT to the much-discussed assembly role filled by Foxcon in China.

Anyone know the estimated breakout of where the money goes?

It's just our trade rules that slap the "made in China" label on the product. Even if that assembly is just say 10% or whatever it really happens to be.
post #18 of 27
Quote:
Originally Posted by Dr Millmoss View Post

I suppose I agree sInce I posted almost exactly the same comments three hours ago.

Sorry to be redundant and repetitive. How embarrassing. I should quit my job to make time to read all comments before posting my two cents. Can't wait to opine in those threads where there are 200+ comments. I will become more original by first reading all of them before creating entirely unique comments. And I will patiently stick around to read all ensuing comments to learn who agrees, disagrees with or simply repeats what I write.




[Tongue in cheek]
post #19 of 27
Quote:
Originally Posted by stelligent View Post

Sorry to be redundant and repetitive. How embarrassing. I should quit my job to make time to read all comments before posting my two cents. Can't wait to opine in those threads where there are 200+ comments. I will become more original by first reading all of them before creating entirely unique comments. And I will patiently stick around to read all ensuing comments to learn who agrees, disagrees with or simply repeats what I write.




[Tongue in cheek]

Well, okay. But in theory this is supposed to be a discussion, which means that you do read what others post. I know, I'm a dreamer.
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post #20 of 27
Quote:
Originally Posted by SailorPaul View Post


It's just our trade rules that slap the "made in China" label on the product. Even if that assembly is just say 10% or whatever it really happens to be.

It's not just US trade rules that dictate this. This is an international trade rule. Typically, the country of origin is where the "last substantive transformation" was made. Assembly surely represents a last substantive transformation.
post #21 of 27
Quote:
Originally Posted by Dr Millmoss View Post

Well, okay. But in theory this is supposed to be a discussion, which means that you do read what others post. I know, I'm a dreamer.

So you'd read all 200+ preceding comments before diving in? You the man! Me, I still have not read your comment that I ostensibly repeated. So I only have your word that I'm echoing you. Perhaps you're just pulling my leg. Hmmm ...
post #22 of 27
Quote:
Originally Posted by iMoan View Post

Wow. This is exactly what I said the other day when the forum was attacking Best Buy as bait and switch swindlers and I got not one response from anyone. Guess no one wanted to slow down the Best-Buy-Bash fest.



Even better. Now lets take the tragedy in Japan and turn it into a praise fest for Apple. Yes, Tim Cook will work his magic and persuade devastated quake victims to "get back to work" on the iPad.

Harpic! Is it your intent to be deliberately trollish or are you reading more into the commentary than is actually there?

There you now have your response so much desired and a gilded spot on my ignore list!
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post #23 of 27
Quote:
Originally Posted by stelligent View Post

So you'd read all 200+ preceding comments before diving in? You the man! Me, I still have not read your comment that I ostensibly repeated. So I only have your word that I'm echoing you. Perhaps you're just pulling my leg. Hmmm ...

Interesting math, given that this thread is only 24 comments long. I try to stay away from the really long threads for that very reason.
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post #24 of 27
Quote:
Originally Posted by SailorPaul View Post

One Japanese manufacturer was publicly discussing the need to open a second factory in the USA in order to insure reliable production worldwide. From memory it was the polymer film mfg for lithium batteries in the last two-three weeks.

Might be nice to see this as a discussion point with all key suppliers. It's becoming rather clear that a lot of the money for iPhone and IPad construction is going to component suppliers in Japan (maybe Taiwan and other places as a guess) and NOT to the much-discussed assembly role filled by Foxcon in China.

Anyone know the estimated breakout of where the money goes?

It's just our trade rules that slap the "made in China" label on the product. Even if that assembly is just say 10% or whatever it really happens to be.

Let me explain - no that would take too long, let me sum up:

The parts are spec'd, ordered and supplied from any number of parts suppliers like Samsung, Civilux, Toshiba, Elpida Memory, AKM Semiconductor, Broadcomm, and Ashai Glass Co. for example. Each of these has to meet part spec requirements and demonstrate capacity. Some of these companies have assembly plants in Japan, some do not. Assembly of the parts into devices is done at Foxconn in China. As Apple has stated before in past earnings reports, they leverage their ability to purchase forward in high volume in order to keep component prices low for themselves and their needs. Apple however doesn't provide a point-by-point breakdown of the component and assembly costs to produce their devices.
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post #25 of 27
Quote:
Originally Posted by AppleInsider View Post

...touchscreen overlay glass believed to be from Ashai Glass Co.

Quote:
Originally Posted by fecklesstechguy View Post

...parts suppliers like...Ashai Glass Co.

Who in the world is "Ashai Glass"? Can anyone provide a website for a Japanese glass-maker under that name? I think not. The proper spelling of the Japanese glass maker is in fact Asahi Glass, whose English website is found here:

http://www.agc.com/english/index.html
post #26 of 27
Quote:
Originally Posted by Dr Millmoss View Post

Interesting math, given that this thread is only 24 comments long. I try to stay away from the really long threads for that very reason.

Using proper arithmetic would diminish the motive of being glib. But in all seriousness, you're being a good sport by not flaming me left, right and center. Kudos (seriously).
post #27 of 27
Quote:
Originally Posted by fecklesstechguy View Post

Let me explain - no that would take too long, let me sum up:

The parts are spec'd, ordered and supplied from any number of parts suppliers like Samsung, Civilux, Toshiba, Elpida Memory, AKM Semiconductor, Broadcomm, and Ashai Glass Co. for example. Each of these has to meet part spec requirements and demonstrate capacity. Some of these companies have assembly plants in Japan, some do not. Assembly of the parts into devices is done at Foxconn in China. As Apple has stated before in past earnings reports, they leverage their ability to purchase forward in high volume in order to keep component prices low for themselves and their needs. Apple however doesn't provide a point-by-point breakdown of the component and assembly costs to produce their devices.

I understood that up front, and should have at least touched on those facts. My point is only that assembly is not the majority of the value in the product AND that after the Japan twin disasters it's also clear that concentration of manufacturing in a single economy may not be in everyone's best interests.
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