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Labor & materials shortages likely to affect Apple's iPad, iPhone shipments

post #1 of 22
Thread Starter 
Issues in Apple's overseas supply chain, including shortages of both labor and materials, are anticipated to affect shipments of both the iPad 2 and iPhone 4.

Apple's overseas manufacturing partner Foxconn reportedly faces a shortage of both labor and materials at plants in Chengdu, China, sources at upstream component makers told DigiTimes. The alleged issues are expected to affect Apple's ability to ship hot selling products like the iPhone 4 and iPad 2 in the second quarter of calendar 2011.

Foxconn failed to directly address the issue in a statement, instead only revealing that the company is doing everything it can to satisfy the needs of its clients. The company also said it has experience arranging manpower to reach clients' goals.

Apple reportedly is experiencing demand for between 2.5 million and 3 million iPad 2 units per month. But issues with components following the devastating earthquake in Japan, combined with labor issues, mean Foxconn is reportedly falling short of those production goals.

Foxconn's plants in Chengdu are primarily used for manufacturing the iPad 2. But the labor issues in the area, along with a shortage of power amplifiers and memory for Apple's touchscreen tablet, have led most of the production to come instead from Shenzhen, China.

"Most market watchers have estimated that total iPad 2 shipments in the second quarter will reach as high as seven million units, but since Apple is trying to reach its shipment goal of 35-40 million units for 2011, the company has been pushing its upstream partners to aim at supplying 10-10.5 million units in the second quarter," the report said.



In April, Apple Chief Operating Officer Tim Cook said the earthquake and tsunami disaster in Japan had not greatly affected the availability of components for devices like the iPad 2 and iPhone 4. But he also noted that the situation remained, at the time, volatile, with aftershocks and potential power outages.

Cook revealed that Apple had been working "around the clock on contingency plans" to ensure that components could be secured if deals were to fall through in Japan. But he also indicated that Apple would prefer to stick with its long-term partners there, if possible.

Last quarter, Apple sold 4.69 million iPads, a number that disappointed some on Wall Street who had higher hopes, given the crushing demand Apple experienced during that quarter's launch of the iPad 2. Cook said that his company experienced "the mother of all backlogs" following the iPad 2 launch, as his company struggled to keep up with demand.
post #2 of 22
Gearing up for production of the iPhone 4S/5 makes matters even more difficult.
post #3 of 22
Good thing I bought new stocks at 320 because I think the AAPL is in for a bumpy ride.
post #4 of 22
The resident trolls are quick to point out that Android is utterly destroying iOS. So how come they don't have supply issues? If Android is up to 400,000 activations per day where are those manufacturers getting the product from? If Apple is selling every iPhone and iPad they can make but can't keep up with demand, and Android phone/tablet makers are cleaning Apple's clock (their statement, not mine) with sales, then things don't make sense.
post #5 of 22
One more 4.5 - 5 million iPad quarter and you'll be able to buy AAPL under $300.
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post #6 of 22
Quote:
Originally Posted by lkrupp View Post

The resident trolls are quick to point out that Android is utterly destroying iOS. So how come they don't have supply issues? If Android is up to 400,000 activations per day where are those manufacturers getting the product from? If Apple is selling every iPhone and iPad they can make but can't keep up with demand, and Android phone/tablet makers are cleaning Apple's clock (their statement, not mine) with sales, then things don't make sense.

I think you beat the resident trolls to it! Um....
post #7 of 22
Quote:
Originally Posted by lkrupp View Post

The resident trolls are quick to point out that Android is utterly destroying iOS. So how come they don't have supply issues? If Android is up to 400,000 activations per day where are those manufacturers getting the product from? If Apple is selling every iPhone and iPad they can make but can't keep up with demand, and Android phone/tablet makers are cleaning Apple's clock (their statement, not mine) with sales, then things don't make sense.

My guess... when you're only shipping 500,000 - 1,000,000 phones* or 100,000 tablets* per quarter its much easier to supply parts.

*individual manufacturers
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post #8 of 22
Quote:
Originally Posted by lkrupp View Post

The resident trolls are quick to point out that Android is utterly destroying iOS. So how come they don't have supply issues? If Android is up to 400,000 activations per day where are those manufacturers getting the product from? If Apple is selling every iPhone and iPad they can make but can't keep up with demand, and Android phone/tablet makers are cleaning Apple's clock (their statement, not mine) with sales, then things don't make sense.

You have to realize that most Android smartphones are not at the level of sophistication of the iPhone. There are a lot of really cheap Android phones being sold. Analysts don't pay attention to these sort of things and think in terms of unit quantity. Plus with so many companies producing Android smartphones, assembly and components can be spread to many different factories and suppliers. Apple deals with a couple of top companies only and relies on them to get the work done. 99 times out of 100 it works, but when you have a natural disaster, I guess all bets are off. In Apple's case, demand won't quickly fall off if supply slows, so I guess Apple shareholders are lucky in that respect.
post #9 of 22
Quote:
Originally Posted by island hermit View Post

One more 4.5 - 5 million iPad quarter and you'll be able to buy AAPL under $300.

I have to agree. Wall Street is looking for any reason or chink in Apple's armor to drive the price way down. If record revenue quarters can't move Apple stock upward, any minor miss will drop the share price quickly. Apple is nothing like Netflix or Amazon. For those companies, misses don't matter. Of course, they don't have supply chain problems like Apple does. This supply shortage rumor is everywhere now.

Apple shareholders are facing a battle they most likely won't win since misses are usually magnified. Anti-Apple sentiment runs high on WS. Apple's rise must have put a lot of pressure on the traditional computer industry stocks and I'm sure there are a lot of unhappy institution and fund holders out there.
post #10 of 22
Quote:
Originally Posted by Constable Odo View Post

I have to agree. Wall Street is looking for any reason or chink in Apple's armor to drive the price way down. If record revenue quarters can't move Apple stock upward, any minor miss will drop the share price quickly. Apple is nothing like Netflix or Amazon. For those companies, misses don't matter. Of course, they don't have supply chain problems like Apple does. This supply shortage rumor is everywhere now.

Apple shareholders are facing a battle they most likely won't win since misses are usually magnified. Anti-Apple sentiment runs high on WS. Apple's rise must have put a lot of pressure on the traditional computer industry stocks and I'm sure there are a lot of unhappy institution and fund holders out there.

The only thing that will move AAPL up is something bad happening to the competition. Im waiting for PlayBook sales numbers
post #11 of 22
Quote:
Originally Posted by Constable Odo View Post

You have to realize that most Android smartphones are not at the level of sophistication of the iPhone. There are a lot of really cheap Android phones being sold. Analysts don't pay attention to these sort of things and think in terms of unit quantity. Plus with so many companies producing Android smartphones, assembly and components can be spread to many different factories and suppliers. Apple deals with a couple of top companies only and relies on them to get the work done. 99 times out of 100 it works, but when you have a natural disaster, I guess all bets are off. In Apple's case, demand won't quickly fall off if supply slows, so I guess Apple shareholders are lucky in that respect.

We should be seeing Nokia and other feature phone vendors being hurt by cheap Android-based phones.

I cant explain it any other way since we see the premium iPhone growing as a percentage of all phones and smartphones yet we know that Android OS has a marginal lead over iOS in activations. I think the only explanation is that there multi-vendor business model is scraping feature phone barrel.
So what makes the iPhone dead in the water?

The claim was made relative to the (a) share of (b) mobile platforms (c) installed base (d) in the US. In other words, if one adds all Android phones in use vs. the iPhones in use in the US (while ignoring iOS devices other than iPhone) while the market is growing at nearly triple digit rates, then the iPhone is not gaining (much) share.

Thats the most obtuse way of suggesting a slowing product. If something is dead in the water, it isnt going anywhere or making any progress.
http://www.asymco.com/2011/05/11/mea...hone-progress/
Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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Dick Applebaum on whether the iPad is a personal computer: "BTW, I am posting this from my iPad pc while sitting on the throne... personal enough for you?"
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post #12 of 22
Quote:
Originally Posted by lkrupp View Post

The resident trolls are quick to point out that Android is utterly destroying iOS. So how come they don't have supply issues? If Android is up to 400,000 activations per day where are those manufacturers getting the product from? If Apple is selling every iPhone and iPad they can make but can't keep up with demand, and Android phone/tablet makers are cleaning Apple's clock (their statement, not mine) with sales, then things don't make sense.

Simply put, Apple uses higher-quality materials. Even a year later no one else has matched the iPhone 4's screen's pixel density in mass production. Apple uses high-quality sensors, IPS screens, high-capacity custom batteries, etc. Thus their supply chain is more constrained.

That's one reason the background noise for Apple to create an "iPhone Nano" has been increasing in volume lately. Presumably Apple would be able to use more generic parts and be able to produce them in much greater quantities.
post #13 of 22
Quote:
Originally Posted by Constable Odo View Post

Apple's rise must have put a lot of pressure on the traditional computer industry stocks and I'm sure there are a lot of unhappy institution and fund holders out there.

I think that some traders see more short term opportunity in trying to pull Apple down than in pushing it higher. Spreading rumors of supply chain issues is a good way to proceed right now since there is genuine pressure due to both demand and the disruption in Japan. Don't expect any statement from Apple unless the attack gets really out of hand.

As for institutional stock holders, there are plenty that have invested in Apple and made a boodle. But yes, sore losers abound, as witnessed by any Apple message board that you might visit. I don't follow short sell volume for Apple but that is where you might find a clue. I don't think that many are betting on a big Apple dip right now but keep your eye on these supply rumors ... it might increase.

As we saw in the last earnings announcement, Apple is sufficiently diversified and growing strongly across all sectors except iPod that a shortage of iPads was made up by the Mac and iPhone legs.
post #14 of 22
Quote:
Originally Posted by farshad View Post

The only thing that will move AAPL up is something bad happening to the competition. Im waiting for PlayBook sales numbers

The play book will have shipped a lot of units. I saw at least 20 in inventory at an airport shop. I doubt many will sell, but they have different distribution points for now for impulse buys, and that may give RIM a chance. Sell through on the other hand...
post #15 of 22
This just in... "Investors Toying with APPL Share Prices Caught Bribing Foxconn to Release Statements Intended to Drive Down Share Prices".

Tell me you wouldn't be surprised by such a headline?
post #16 of 22
Quote:
Originally Posted by island hermit View Post

One more 4.5 - 5 million iPad quarter and you'll be able to buy AAPL under $300.

IPad 2 was only sold part of the quarter, sales of IPad 1 dropped off in beginning of quarter due to anticipation of 2. Japanese shortage of Apple components are way overstated, steady electric power has been restored a long time and factories are no where near the sunami area. Shortage of labor in China? I don't think so, Cook has had plenty of time to get Apples supply ducks in a row.
post #17 of 22
Quote:
Originally Posted by Constable Odo View Post

I have to agree. Wall Street is looking for any reason or chink in Apple's armor to drive the price way down. If record revenue quarters can't move Apple stock upward, any minor miss will drop the share price quickly. Apple is nothing like Netflix or Amazon. For those companies, misses don't matter. Of course, they don't have supply chain problems like Apple does. This supply shortage rumor is everywhere now.

Apple shareholders are facing a battle they most likely won't win since misses are usually magnified. Anti-Apple sentiment runs high on WS. Apple's rise must have put a lot of pressure on the traditional computer industry stocks and I'm sure there are a lot of unhappy institution and fund holders out there.

You nailed it. Short sellers have been trying to drive down Apple lately, and they have been very successful, especially when they convinced the nasdaq 100 to rebalance their Apple pecentages in that and other ETF's.

Don't forget that high short interest is actually a bullish sign, since at some point, the short interest must be settled with buy orders. It has always been a very good "contrary" indicator, for very sound reasons. If Apple ever jumps a significant amount, the short interest guys will cause a classic "short squeeze", causing Apple to jump to the stratosphere (let's hope sooner rather than later).

It's amazing that Wall Street hates Steve Jobs so much, but human history is littered with such instances of enjoying bringing down the successful _______________ (CEO, president, prime minister, king, queen, prince, emperor, sports figure, actor, singer, or your other celebrity choice inserted here).
post #18 of 22
Quote:
Originally Posted by FormerARSgm View Post

This just in... "Investors Toying with APPL Share Prices Caught Bribing Foxconn to Release Statements Intended to Drive Down Share Prices".

Tell me you wouldn't be surprised by such a headline?

I'd be surprised by a headline appearing. However I would not be surprised that it's actually happening.
post #19 of 22
Quote:
Originally Posted by nvidia2008 View Post

I'd be surprised by a headline appearing. However I would not be surprised that it's actually happening.

Didn't I see predictions in the AI forums somewhere than "some analysts" were projecting $450+ before the year is out? Nearly all these supposed professional gurus have their own agenda's for projecting stock prices.

If you ain't buyin' or sellin' then their mamas ain't eatin'.
melior diabolus quem scies
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post #20 of 22
Quote:
Originally Posted by Booga View Post

Simply put, Apple uses higher-quality materials. Even a year later no one else has matched the iPhone 4's screen's pixel density in mass production. Apple uses high-quality sensors, IPS screens, high-capacity custom batteries, etc. Thus their supply chain is more constrained.

That's one reason the background noise for Apple to create an "iPhone Nano" has been increasing in volume lately. Presumably Apple would be able to use more generic parts and be able to produce them in much greater quantities.

did you say iphone nano ??? yes !!!!

i also think apple will ship a smaller ipad soon .


9
whats in a name ? 
beatles
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whats in a name ? 
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post #21 of 22
Quote:
Originally Posted by brucep View Post

did you say iphone nano ??? yes !!!!

i also think apple will ship a smaller ipad soon .

9

No, and no. Sorry, brucep love ya but Apple has too much going on to have yet another killer product to keep up with demand.

At this moment Apple could release a white fart encased in glass and aluminium and people will be queueing up for blocks.
post #22 of 22
Apple should have kept a manufacturing plant in the US. US companies are going to learn the hard way what happens when you depend entirely on China...

I doubt the iPad numbers are going to be as high as they want this quarter. They are still in short supply at US retailers. It's hard to walk in off the street and buy one. Apple stores in Portland are still telling people to line up at 6am if you want to try to get one.
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