Limited iPhone 4 stock viewed as 'competitive risk' for Apple

Posted:
in iPhone edited January 2014
If Apple wasn't saddled with iPhone 4 production constraints, launch sales could have gone as high as 2.5 million, one analyst believes. And if limited stock continues, it could open Apple up to a "competitive risk," according to a new analysis.



iSuppli says limited supply could hurt Apple



iSuppli Corp. on Tuesday said that Apple's inability to meet demand for the iPhone 4 could be problematic for the company if issues continue. They said it could prompt "frustrated customers" to consider switching to a competing smartphone.



"While the channel supply issue might not impact total iPhone sales for the entire year, what is happening now certainly has done some damage to the Apple brand," said Tina Teng, senior analyst for wireless communications at iSuppli. "Consumers, questioning Apple's supply chain management capability, have started to look for alternative devices. In particular, consumers are not satisfied with Apple's response to the antenna issue causing poor reception and dropped calls."



iSuppli believes that 21.7 million of the 42.6 million iPhones Apple will sell this year will be its latest model, the iPhone 4. But the report said the huge demand for the new handset has come at a cost for Apple.



As evidence of events that could drive away frustrated customers, the report cited technical issues that prevented some from preordering an iPhone 4 on the first day, and cause AT&T to suspend its orders entirely after 24 hours. Customers turned out in droves last week at Apple stores to be among the first to own the iPhone 4, and those lines grew again Tuesday as AT&T began accepting first-come, first-served orders at its retail locations. Strong demand has also forced Apple to advertise a three-week wait for new iPhone 4 orders.



Teng said that manufacturers should learn from Apple that any product launch can come with a number of unexpected issues.



"The lesson here is manufacturers beware," she said.







Kaufman Bros.: Apple's iPhone 4 could have sold 2.5M at launch



Analyst Shaw Wu issued a note to investors Tuesday in which he said if it weren't for production constraints, he believes iPhone 4 shipments would have been between 2 million and 2.5 million. Apple announced on Monday that it sold 1.7 million of the iPhone 4 in its first three days. That soundly beat the previous records of 1 million held by the iPhone 3G and iPhone 3GS.



Unlike iSuppli, Wu does not believe customers are very likely to choose an alternative smartphone due to supply issues.



"At this point, we remain comfortable with our forecast looking for 9 million total iPhone units for the June quarter and 40 million for (calendar) 2010," Wu wrote. "The one risk we see is continued supply issues due to production constraints. We are not as concerned with demand generation nor competition."



The analyst also spoke once again on the iPhone 4 antenna issue that continues to gain publicity. Last week, he said that the "worst case" for Apple would be that the Cupertino, Calif., company gives away free protective cases for the handset with little financial impact. On Tuesday, he reiterated that belief.



"In terms of the antenna reception issue caused apparently by human contact with the external antennas, there has been speculation that a software fix could be in the works," he said. "If not, we again do not believe this is that big of a deal in that most users opt to have a case anyway to protect their iPhone and to customize to their personal preferences."
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Comments

  • Reply 1 of 87
    Yes.. I'm sure Apple has grave concerns about selling phones faster then they can make them... lol
  • Reply 2 of 87
    These analysts are full of it. Sometimes I wonder if their true motivation is to artificially drive down AAPL stock prices so new investors can pick some up.



    Nevertheless, I am sure Apple is not worried that they are making money hand over foot
  • Reply 3 of 87
    robin huberrobin huber Posts: 3,192member
    Yes, when your products fly off the shelves it does kind of limit the scope of your competitors' criticisms to the trivial and the absurd.
  • Reply 4 of 87
    gqbgqb Posts: 1,934member
    Quote:
    Originally Posted by cuppingmaster View Post


    These analysts are full of it. Sometimes I wonder if their true motivation is to artificially drive down AAPL stock prices so new investors can pick some up.



    Nevertheless, I am sure Apple is not worried that they are making money hand over foot



    "Sometimes wonder"??

    What do you think the whole antenna FUD campaign is about?

    And judging by today's $12 drop, its working.



    Buying opportunity.
  • Reply 5 of 87
    Terrible news.



    Apple will sell every phone it makes.



    Apple brand takes a hit due to bad press about unavailable phones.



    Apple sells every phone it makes.
  • Reply 6 of 87
    jragostajragosta Posts: 10,473member
    Quote:
    Originally Posted by IronHeadSlim View Post


    Apple sells every phone it makes.



    Not entirely true.



    Apple sells all the phones it can make for the first couple of months after launch and then the situation settles down - and they are able to keep up. That's why it's not a big issue - customers have to wait a little while in June and July, but there will eventually be enough phones for everyone.



    If Apple was ALWAYS unable to keep up with demand, it would be a more serious issue - they would be losing sales to the competition.
  • Reply 7 of 87
    dr millmossdr millmoss Posts: 5,403member
    Quote:
    Originally Posted by rorybalmer View Post


    Yes.. I'm sure Apple has grave concerns about selling phones faster then they can make them... lol



    Believe it or not, they should... and because they are smart, they do. Every sale that you can't make to a willing customer at the moment they want to buy, is potentially a lost sale. Some will wait, but others have needs now and will go elsewhere. Bottom line, an inability to satisfy demand with your products is a gift to your competitors.



    That said, the economy being what it is, no company is going to want to be stuck with excess inventory, so they are even more conservative than they might otherwise be in production. The risk is they won't have enough stock on hand if the product is a big hit right out the gate.
  • Reply 8 of 87
    dr millmossdr millmoss Posts: 5,403member
    Quote:
    Originally Posted by cuppingmaster View Post


    These analysts are full of it. Sometimes I wonder if their true motivation is to artificially drive down AAPL stock prices so new investors can pick some up.



    Nonsense. It's a real concern. Blindness to the concern does not make unreal.
  • Reply 9 of 87
    Apple began to learn back in the 80s that you don't overproduce hardware if at all possible. Remember the Lisa and how the entire inventory was dumped in a landfill? Granted they don't have a dog on their hands with the iPhone, but their sales are exceeding even the Wall Street expectations, and it isn't like they are constraining production. Seems like they are trying to build them as fast as they can (in addition to iPads and Macs), but they couldn't build them 6 months ago (before designs etc. were finished) and stockpile them in a warehouse till now. They'd have had more than the Gizmodo model slipping out, and somebody screaming about how Apple is hoarding them and should have released them sooner if they already had them made etc. etc. etc.
  • Reply 10 of 87
    lkrupplkrupp Posts: 6,293member
    Quote:
    Originally Posted by GQB View Post


    "Sometimes wonder"??

    What do you think the whole antenna FUD campaign is about?

    And judging by today's $12 drop, its working.



    Buying opportunity.



    Have you, by chance, looked at what other technology stocks are doing today? They are all down about 3%. The whole market is tanking today. Your theory has no credibility.
  • Reply 11 of 87
    dr millmossdr millmoss Posts: 5,403member
    Quote:
    Originally Posted by lkrupp View Post


    Have you, by chance, looked at what other technology stocks are doing today? They are all down about 3%. The whole market is tanking today. Your theory has no credibility.



    I wonder how many of our local stock market conspiracy theorists ever look any stock price that isn't listed on the front page of AI.
  • Reply 12 of 87
    predragpredrag Posts: 26member
    The argument about short supplies driving people to competition holds very little water (but still holds some). Vast majority of people who were/are rushing to buy iPhone 4 are people who were waiting for it, or have heard rave reviews of it, and have decided they want it. They want IT (not an Android, or anything else). Among all those who are now going to Apple (or AT&T) stores to buy an iPhone, there will be a minuscule number of people who just happen to need (or want) to buy a smartphone at this particular time (a first purchase, or a refresh), and have decided to go get an iPhone, even though they don't know much about it, and don't really care too much one way or the other. In other words, those people who have heard good things of the device, but aren't nearly as passionate as the rest of the early buyers to go out of their way to get it. If they can't get it in the store on the day they go in, they may consider alternatives: "So you don't have this one in stock, but you have this other one, and you say it's the same, it will give me e-mail, web, music, videos?" And these may end up buying an Android device, totally oblivious to the difference between iPhone and Android.



    It is a negligible number of people, and it is these people of which the analysts are talking.
  • Reply 13 of 87
    cvaldes1831cvaldes1831 Posts: 1,832member
    Quote:
    Originally Posted by Dr Millmoss View Post


    I wonder how many of our local stock market conspiracy theorists ever look any stock price that isn't listed on the front page of AI.



    Probably 2-3%.



    Things like broad market declines, the Greek debt fiasco, or the entire tech sector getting hammered simply don't register with these people. Being up to date on current affairs isn't part of their worldview.
  • Reply 14 of 87
    trumptmantrumptman Posts: 16,448member
    I can see this from both angles.



    First Google has claimed that they are shipping 160,000 devices a day up from 100,000. It is clear they are accelerating sales and that even with Apple's huge initial numbers, they might match them unit for unit as well. Anything that helps Google and harms Apple here has to be taken into account including Apple's possible loss of sales due to inability to get enough product.



    Second, Apple has more than one i-device to update and inability to meet demand for one could affect the rollout of the other. September is traditionally the month that the iPod Touch is updated. Clearly people are expecting big things for it given the iPhone update. It is also good because it allows Apple to keep customers who might not be willing to shell out for a smartphone data plan (the kids) or they are unwilling to go with AT&T. Also it is important that Apple have both product lines in place and producing enough to meet demand before the big Christmas season.



    So it isn't a stretch to say that if you couldn't get an updated iPhone and couldn't get an updated iPod Touch, that you might be willing to at least look at an alternative.



    Now some of those alternatives are having issues as well, but others are not. HTC is having lots of trouble keeping Droid Incredibles supplied for Verizon and has had to switch screen suppliers. They are also having trouble keeping Sprint up with EVO's. It appears Motorola might benefit from this because there is talk people are cancelling orders from Incredibles and putting them down for DroidX's and Droid 2's.



    Even if someone wants to stay within the total Apple ecosphere, pretty much everyone knows what Apple is doing at this stage. They update once a year. They could choose to do more than one update, but if they can't pull off this one, then how can they pull off a second, and also if everyone can anticipate Apple's moves and you've been pushed off from enjoying your new iPhone 4 for three months due to delays while you own a 3GS, you might just decide to wait it out and make sure you have that update in place for the iPhone 5 which even though you would still be buying Apple it would be viewed as a lost sale.



    I'm personally of the view that Apple intentionally declocked the iPhone 4's CPU and will upclock it mid-year along with perhaps some other addition (colors?) in an attempt to create more even demand throughout the year.



    One last issue that has to be thrown in there is that many analysts keep floating the Verizon rumor because it is a path of easy growth. I'm personally of the view that Apple isn't going to make a CDMA phone ever. It clearly isn't hard to write code for nor impliment a second type of radio chip. Apple has decided that CDMA is their second hardware mouse button. They just aren't going to go there. However for those hoping they will go there, if they can't create enough GSM iPhones for the world, they certainly won't be able to add CDMA into the mix so that sort of puts a stop to the rumors there.
  • Reply 15 of 87
    pridonpridon Posts: 81member
    Quote:
    Originally Posted by freqsound View Post


    Apple began to learn back in the 80s that you don't overproduce hardware if at all possible. Remember the Lisa and how the entire inventory was dumped in a landfill? Granted they don't have a dog on their hands with the iPhone, but their sales are exceeding even the Wall Street expectations, and it isn't like they are constraining production. Seems like they are trying to build them as fast as they can (in addition to iPads and Macs), but they couldn't build them 6 months ago (before designs etc. were finished) and stockpile them in a warehouse till now. They'd have had more than the Gizmodo model slipping out, and somebody screaming about how Apple is hoarding them and should have released them sooner if they already had them made etc. etc. etc.



    Wonder how many Evos have been sold. Supply must not be an issue because they are not flying off the shelf, I suspect.



    Apple was vulnerable to todays market action as were all the high beta tech stocks. GOOG also hurting and is still way down from top. A lost of this is program selling with the day traders likely shorting on the follow through. Few, if any, large cap stocks are having anywhere near the profit or revenue growth. And about the time the iPhone4 sales start to slow, I expect to see a VZ phone. Apple has to be ready for a 2mill launch day on VZ.



    My 2 cents.
  • Reply 16 of 87
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by Dr Millmoss View Post


    I wonder how many of our local stock market conspiracy theorists ever look any stock price that isn't listed on the front page of AI.



    It's more than just technology, everything I have is down. I haven't had time to look at all the financial news, is there one specific reason for this drop today?
  • Reply 17 of 87
    eriamjheriamjh Posts: 1,075member
    FUD. FUD. FUD. FUD. FUD. FUD. FUD. FUD. FUD. FUD. FUD. FUD. FUD. FUD. FUD. FUD.



    This is so much FUD it borders on the absurd!



    iPhone buyers are not all Android buyers. This is launch hype.



    Apple has stock = iPhone not selling = bad

    Apple is sold out = customers are switching to other phones = bad



    What's left? Shoot these analysts, please!
  • Reply 18 of 87
    carjvccarjvc Posts: 1member
    Got turned away at ATT store this am due to long lines and not enough iphones.



    I doubt Apple has much to worry about. No similar lines for Android phones nor similar demand. Same for RIM, Nokia, Microsoft.
  • Reply 19 of 87
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by carjvc View Post


    Got turned away at ATT store this am due to long lines and not enough iphones.



    I doubt Apple has much to worry about. No similar lines for Android phones nor similar demand. Same for RIM, Nokia, Microsoft.



    Welcome to the forum.



    Does anyone remember when there were lines around the corner for Windows 95?
  • Reply 20 of 87
    "Because people want the iPhone 4 so bad, they'll get something else!"



    Wait, what!?



    Quote:
    Originally Posted by GQB View Post


    "Sometimes wonder"??

    What do you think the whole antenna FUD campaign is about?

    And judging by today's $12 drop, its working.



    Buying opportunity.



    Part antenna, mostly global market.
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