Shortages of Apple's iPad and iPhone to bleed into June quarter following Japan tsunami
The March 11th tsunami that has devastated Japan is expected to create shortages of Apple's most popular products for the remainder of the month and through next quarter, as at least two of the company's core component suppliers in the region have temporarily shut down operations to assess damages.
Speaking to contacts in Asia last night, Piper Jaffray analyst Gene Munster learned that the production status from Apple's Japanese-based component suppliers is changing hour by hour, but said that none of those partners have been able to quantify the extent of their damage with any degree of certainty, nor have they set a timeline for when production will resume.
In particular, Munster said that Mitsubishi Gas Chemical Co, which he believes is Apple's primary supplier of BT resin -- used in producing printed circuit boards for chips in iPhone and iPad -- is temporarily shut down to assess damage related to the earthquake. Similarly, Toshiba, which produces around 40% of the world's flash memory and supplies a significant portion of that to Apple for its iOS devices, is temporarily shut down for the same reasons.
As such, the analyst expects component delays for some of Apple's key products, including iPhone 4 and iPad 2, to persist throughout the June quarter. That said, he notes that the company's investor community has historically chosen not to punish the company for supply-related issues as long as demand for Apple products remains strong. In this case, "demand is stronger than ever, which should move shares higher," he said.
Potentially helping to mitigate the affect of this month's natural disaster is Apple's strategic component purchasing deals, which have seen the company secure long-term supply arrangements (1, 2, 3, 4) for key components such as flash memory and displays from multiple vendors in order to create a layer of protection and redundancy that kicks in during situations such as these.
"This strategy has proven to be an effective way for Apple to leverage its balance sheet and its position as one of the largest buyers of many of the components it uses; moreover, this strategy may prove particularly helpful if supply is limited and pricing increases," Munster said. "Finally, we believe Apple buys futures on important components, which will help offset near-term pricing swings. Our conclusion is that Apple is well positioned to suffer proportionally less than its competitors."
Although the analyst isn't concerned with Apple maintaining its well-above-average profit margins during the March and June quarters, he does believe rising component prices as a result of the Japanese quake could apply some downward pressure on profits during the second half of the year as component prices may rise.
On the consumer buying side, Munster estimates that the disruption in Japan will impact his March quarter revenue estimates for Apple by just under 1%, or $202 million. In the worst case scenario, assuming the company generates absolutely no sales in the region through the first half of the June quarter, he believes the negative effect would equate to just 2.7%, or $563 million.
The analyst maintained his Overweight rating and $483 price target on shares of Apple.
Speaking to contacts in Asia last night, Piper Jaffray analyst Gene Munster learned that the production status from Apple's Japanese-based component suppliers is changing hour by hour, but said that none of those partners have been able to quantify the extent of their damage with any degree of certainty, nor have they set a timeline for when production will resume.
In particular, Munster said that Mitsubishi Gas Chemical Co, which he believes is Apple's primary supplier of BT resin -- used in producing printed circuit boards for chips in iPhone and iPad -- is temporarily shut down to assess damage related to the earthquake. Similarly, Toshiba, which produces around 40% of the world's flash memory and supplies a significant portion of that to Apple for its iOS devices, is temporarily shut down for the same reasons.
As such, the analyst expects component delays for some of Apple's key products, including iPhone 4 and iPad 2, to persist throughout the June quarter. That said, he notes that the company's investor community has historically chosen not to punish the company for supply-related issues as long as demand for Apple products remains strong. In this case, "demand is stronger than ever, which should move shares higher," he said.
Potentially helping to mitigate the affect of this month's natural disaster is Apple's strategic component purchasing deals, which have seen the company secure long-term supply arrangements (1, 2, 3, 4) for key components such as flash memory and displays from multiple vendors in order to create a layer of protection and redundancy that kicks in during situations such as these.
"This strategy has proven to be an effective way for Apple to leverage its balance sheet and its position as one of the largest buyers of many of the components it uses; moreover, this strategy may prove particularly helpful if supply is limited and pricing increases," Munster said. "Finally, we believe Apple buys futures on important components, which will help offset near-term pricing swings. Our conclusion is that Apple is well positioned to suffer proportionally less than its competitors."
Although the analyst isn't concerned with Apple maintaining its well-above-average profit margins during the March and June quarters, he does believe rising component prices as a result of the Japanese quake could apply some downward pressure on profits during the second half of the year as component prices may rise.
On the consumer buying side, Munster estimates that the disruption in Japan will impact his March quarter revenue estimates for Apple by just under 1%, or $202 million. In the worst case scenario, assuming the company generates absolutely no sales in the region through the first half of the June quarter, he believes the negative effect would equate to just 2.7%, or $563 million.
The analyst maintained his Overweight rating and $483 price target on shares of Apple.
Comments
It's awfully quiet from Apple regarding sales/stocks/shortages.
Do you know of any other company that has been vocal about how the earthquake has affected them? It's still pretty early.
As such, the analyst expects component delays for some of Apple's key products, including iPhone 4 and iPad 2, to persist throughout the June quarter. That said, he notes that the company's investor community has historically chosen not to punish the company for supply-related issues as long as demand for Apple products remains strong. In this case, "demand is stronger than ever, which should move shares higher," he said.
So this is saying that investors won't punish Apple for not being able to meet demand because of the earthquake. Nice.
Although the analyst isn't concerned with Apple maintaining its well-above-average profit margins during the March and June quarters, he does believe rising component prices as a result of the Japanese quake could apply some downward pressure on profits during the second half of the year as component prices may rise.
Many people are dead. Whole towns are gone. There may be a nuclear catastrophe.
But in the end it's all about my money. How is this going to affect my 401k? Will I be able to retire to the cream-of-the-crop golf condo community in Scottsdale, or not?
It's awfully quiet from Apple regarding sales/stocks/shortages.
It's been less than a week. It takes a while to compile the numbers of what actually sold, for marketing to go back and readjust their estimates based on the surprisingly large demand, for the purchasing folks to run all of their numbers and contact their suppliers to find out if the suppliers can increase their production....ascertain where the bottlenecks are....etc...
And in the end it doesn't matter, because regardless of how many they can make, Apple will sell every one of them for some time to come. Due to the iPad's popularity, Apple is in the power position and doesn't need to explain themselves.
It's awfully quiet from Apple regarding sales/stocks/shortages.
Apple is DOOMED! God, the Debbie Downers in this world really are P.I.A.
p.s. What REALLY pises me off is all the Xoom ads flashing around AppleInsider. They're everywhere on this site.
So this is saying that investors won't punish Apple for not being able to meet demand because of the earthquake. Nice.
Many people are dead. Whole towns are gone. There may be a nuclear catastrophe.
But in the end it's all about my money. How is this going to affect my 401k? Will I be able to retire to the cream-of-the-crop golf condo community in Scottsdale, or not?
People die every day in a vast number of different scenarios. Yes its a tragic event but life still goes on and people still have their jobs to do. What do you expect people to do? Stop doing their jobs and just feel sorry for those affected?
Many people are dead. Whole towns are gone. There may be a nuclear catastrophe.
But in the end it's all about my money. How is this going to affect my 401k? Will I be able to retire to the cream-of-the-crop golf condo community in Scottsdale, or not?
Sadly ... in the stock market/global economy run world, that's the bottom line.
Greedy shareholders
I arrived at the first Apple store this morning at 6 am and there were already about 300 people ahead of me in line. It was ridiculous, scalper after scalper. I would venture to guess that at least 75% of the crowd were Asian scalpers. Many of them had probably never even touched a computer before in their entire life. There were lots of real old people waiting also. Then came the announcement that there would be no iPads today at all!
So I jumped in a cab along with a few other people whom I had met on the line and we headed down to another Apple store which was near by. At 6:45 am there were about 400 people ahead in line already. It was also full of Asian scalper after Asian scalper. It looked like entire families were there. Insane! Two Apple employees came out at about 8:00 am and let people know where the cut off point for the line was. By that time, close to 1,000 people were waiting in line. I was way behind the cut off point, so I just left.
I'm not going to bother to get an iPad anytime soon from any Apple store. It's a waste of time to be spending hours waiting just to come up empty handed. Those scalpers are losers and have nothing better to do with their time than to spend 12 hours waiting each day. They camp out every single day.
I'm thinking about buying up every single chop stick in New York. After that, I will start selling them for $10.00 a stick. That's per single stick, not per pair. That'll teach those scalpers and the chop stick shortage will surely cause them numerous hardships and problems. And it certainly wouldn't be illegal if I did exactly that.
So this is saying that investors won't punish Apple for not being able to meet demand because of the earthquake. Nice.
Many people are dead. Whole towns are gone. There may be a nuclear catastrophe.
But in the end it's all about my money. How is this going to affect my 401k? Will I be able to retire to the cream-of-the-crop golf condo community in Scottsdale, or not?
I'm sure there are Japanese realtors already trying to acquire land from displaced and missing persons. Life goes on. Using human tragedy is a fine way to make money. Japanese-owned crematoriums are gleefully running 24/7. They undoubtedly wish for daily tsunamis. Nothing is more profitable than price-gouging during times of short supply. Why? Because humans are greedy. Nothing unusual here. Humanity and suffering goes hand in hand. There's always the hope that if you stockpile enough cash, you might be spared some of the suffering. If I were Japanese and had plenty of cash, I'd probably flee Japan before it comes a nuclear wasteland.
People die every day in a vast number of different scenarios. Yes its a tragic event but life still goes on and people still have their jobs to do. What do you expect people to do? Stop doing their jobs and just feel sorry for those affected?
Sure people die every moment of every day, but this is one event killing many people and destroying many people?s way of life, if only for awhile.It?s also an event that does effect the world?s economy as noted by the article.
How many people in Japan are without a job right now? How many are without a home? People?s whose primary concern was what couch to buy might now be radiation fallout, clean drinking water, and if they will get food this week.
Internationally, even if I don?t directly sense it their loss will affect me in some way though commerce because we are a world economy. Sure, life does go on, but it does go on a little differently until Japan can rebuild its infrastructure.
I finally made an effort this morning to get an iPad and was unsuccessful.
I arrived at the first Apple store this morning at 6 am and there were already about 300 people ahead of me in line. It was ridiculous, scalper after scalper. I would venture to guess that at least 75% of the crowd were Asian scalpers. Many of them had probably never even touched a computer before in their entire life. There were lots of real old people waiting also. Then came the announcement that there would be no iPads today at all!
So I jumped in a cab along with a few other people whom I had met on the line and we headed down to another Apple store which was near by. At 6:45 am there were about 400 people ahead in line already. It was also full of Asian scalper after Asian scalper. It looked like entire families were there. Insane! Two Apple employees came out at about 8:00 am and let people know where the cut off point for the line was. By that time, close to 1,000 people were waiting in line. I was way behind the cut off point, so I just left.
I'm not going to bother to get an iPad anytime soon from any Apple store. It's a waste of time to be spending hours waiting just to come up empty handed. Those scalpers are losers and have nothing better to do with their time than to spend 12 hours waiting each day. They camp out every single day.
I'm thinking about buying up every single chop stick in New York. After that, I will start selling them for $10.00 a stick. That's per single stick, not per pair. That'll teach those scalpers and the chop stick shortage will surely cause them numerous hardships and problems. And it certainly wouldn't be illegal if I did exactly that.
Quite possibly the best comment in the history of these forums
1. Gene Munster does not exactly know who Apple's raw component suppliers are. He is guessing, and whilst he may be 100% correct, he may also be 0% correct or somewhere in between.
2. It is not known how much raw material stock both the suppliers and the device manufacturers have. There would also be likely significant components in transit.
3. Many of these suppliers will have access to other plants which they could raise production, they will decide to do this depending on what happens with the component spot prices.
4. The iPhone 5 should be with us in 4 or 5 months time, so demand for the iPhone 4 will begin to fall soon. Yes, the iPad 2 is new and not managing to meet demand but we don't know where the blockage is (whether it is any of the components whose supply would be affected by the disaster in Japan).
5. Apple always has the option of delaying the international launch of iPad 2. Even delayed by 6 weeks, the competition will not be able to launch new products that will take market share away from Apple. Overall sales during the financial year will be likely unaffected.
6. Apple's actions since the disaster (letting people stay in Apple stores, emailing Japanese employers offering assistance) suggests that component supply from Japan is not their top priority, their employees and their families are.
Finally, as Apple has effectively pre-paid for essential raw components, the changes to spot prices will not affect Apple until these contracts have been fulfilled. They will also be at the top of the priority list for these suppliers, even higher than their own device units.
However all of this is insignificant when you think about the scale of the loss of life in Japan. timgriff84, you are right that people die everywhere, everyday but not on this scale.
My thoughts are will all those in Japan who have suffered as a consequence of the disaster.
Phil
I finally made an effort this morning to get an iPad and was unsuccessful.
I arrived at the first Apple store this morning at 6 am and there were already about 300 people ahead of me in line. It was ridiculous, scalper after scalper. I would venture to guess that at least 75% of the crowd were Asian scalpers. Many of them had probably never even touched a computer before in their entire life. There were lots of real old people waiting also. Then came the announcement that there would be no iPads today at all!
So I jumped in a cab along with a few other people whom I had met on the line and we headed down to another Apple store which was near by. At 6:45 am there were about 400 people ahead in line already. It was also full of Asian scalper after Asian scalper. It looked like entire families were there. Insane! Two Apple employees came out at about 8:00 am and let people know where the cut off point for the line was. By that time, close to 1,000 people were waiting in line. I was way behind the cut off point, so I just left.
I'm not going to bother to get an iPad anytime soon from any Apple store. It's a waste of time to be spending hours waiting just to come up empty handed. Those scalpers are losers and have nothing better to do with their time than to spend 12 hours waiting each day. They camp out every single day.
I'm thinking about buying up every single chop stick in New York. After that, I will start selling them for $10.00 a stick. That's per single stick, not per pair. That'll teach those scalpers and the chop stick shortage will surely cause them numerous hardships and problems. And it certainly wouldn't be illegal if I did exactly that.
.... cause no amount of money can save you from death.
Sure, that's true, but you can leave behind more for your descendants, or for charity, or fund more research into things that make the world better off, etc.
Regardless of global circumstances, I'd rather leave behind more than less.
Quite possibly the best comment in the history of these forums
If you're a racist, sure.
Regardless of global circumstances, I'd rather leave behind more than less.
I am trying to that, but with my carbon footprint.
Sure, that's true, but you can leave behind more for your descendants, or for charity, or fund more research into things that make the world better off, etc.
Regardless of global circumstances, I'd rather leave behind more than less.
Thats true, but these stockholders don't care about that... They don't care about life unless their life is in tragedy... but again what good is all this money, if your entire family is wiped out? what about the charity? ... its more then just money, money is one part of society not all, and if these greedy inconsiderate bastered shareholders, want to hold a company to the fire because of their supplies are limited due to a serious life threatening situation, then screw them man. forget those shareholders and their disregard for life.
Fuck their money
But in the end it's all about my money. How is this going to affect my 401k? Will I be able to retire to the cream-of-the-crop golf condo community in Scottsdale, or not?
You're missing the point. Really it's all about whether or not I can get an iPad ASAP without any supply chain disruptions.
Gene Munster does not exactly know who Apple's raw component suppliers are. He is guessing...
He might NOT be a best of predictors, but how do you know that?