“Last week, shares of Apple did something they rarely do: they fell nearly 7 percent, in two days,” Miguel Helft reports for The New York Times. “The unusually sharp drop, which was twice as large as the decline in technology shares over all, was driven in part by worries over the impact that the crisis in Japan would have on Apple’s ability to make its blockbuster products. It didn’t help that the iPad 2, the latest Apple gadget that everyone seems to want to get their hands on, appears to be in increasingly short supply, a situation Apple has found itself in before.”
MacDailyNews Take: For such a smart company, it’s surprising that Apple doesn’t anticipate demand better. It’s a recurring issue; so much so that it’s mystifying why the hell it keeps happening. When prepping iPad 2, Apple didn’t know that iPad was a success? They didn’t know the date they planned to launch iPad 2 and ramp up accordingly? They couldn’t extrapolate from iPad unit sales what was highly likely to happen with iPad 2 demand? And, don’t blame the Japan disasters, they quickly ran out of iPad 2 units on day one and this issue has plagued Apple for years.
For crying out loud, they couldn’t get iPhone 4 supply/demand in balance for nearly a year! Yeah, yeah, yeah, “it’s a nice problem to have,” but how about fixing it at some point? Seriously, what’s the issue, Apple? (Hints: Increase launch supplies and manufacturing capacity. Plan to make at least twice as many iPad 3 units for launch as you currently project. Newsflash: Whatever you think you’ll need at launch is not enough; it hasn’t been for nearly a decade.) “Running a tight ship” does not mean habitually underestimating demand and repeatedly inconveniencing your customers.
Helft continues, “Apple, like other technology companies, is at risk of being buffeted by the unfolding crisis in Japan. Every major computer and consumer electronics maker relies on components that directly or indirectly come from Japan. Apple’s success, though, combined with its recurring difficulties in meeting the demand for some its hottest products, including the iPad and iPhone, have prompted investors to single out the company.”
“On Monday, for example, analysts highlighted a new concern: 300-millimeter wafers, which are silicon disks used to manufacture essential chips for the iPhone and iPad. A factory operated by Shin-Etsu in Shirakawa, in northern Japan, produces at least 15 percent of the world’s supply of the wafers, said Gus Richard, an analyst with Piper Jaffray, and is not likely to become operational for a long time,” Helft reports. “‘Will it affect Apple today or tomorrow?’ Mr. Richard said. ‘No. But everyone is worried about those wafers. At some point, chip makers will run out.'”
Read more in the full article here.
The article gets it wrong from the beginning. There have many occasions when AAPL drops sickeningly for little reason.
To Apple followers like me, it appears that they put a positive PR value on the recurring shortages.
There was a time when the shortages put a shine on the apple, but now it seems like something’s rotten. People waiting a week and still having to get turned away in a lineup, not good. People are getting pissed off. Apple needs to remedy this and quit acting like a victim of their own success. These things used to fall on Tim Cook, but he never did such a great job on projecting either. Can they still be surprised when hit it out of the park? They have a lot more muscle than they used to.
Look, if the Moto Xoom had been any good and Apple hadn’t jumped the gun and come out with the iPad 2 early, they could have ended up in a strategic mess.
Their preemptive attack with the iPad 2 wasn’t needed but it was good strategy nonetheless.
So now we have a 3 week wait, instead of the 3 week wait we would have had if Apple waited to build up supplies before releasing the iPad 2.
But the difference is that millions of people already have an iPad 2 right now, which creates more demand.
Apple always wants to beat expectations and therefore always submits lower forecasts for earnings, which is fine.
However, the same thinking applies to their inventory, which is a mistake. While many of the people looking for an iPad2 that are being turned away every day at Apple stores will most likely come back, it’s not a great leap to say that some will not. It’s not that they’ll go and pick up a Xoom instead of an iPad, but rather that they won’t buy anything at all.
Is Apple leaving money on the table? Definitely. I think shareholders are correct to feel Apple is flawed when it comes to control of inventory. The nightmares in Japan will only exacerbate this existing company weakness.
Apple does not “submit lower forecasts”. They project 40, 50 and 60% higher than a year earlier, and people like you think that this is “lower forecasts”?!?
To be clear: I meant lower than what they truly expect, not lower than the actual results from one year prior.
Since when has MDN become logistics experts? You make product and then just store it, that ties up your capital. Granted, that’s not a problem for Apple, but it is also something they did a lot in the 90s, so it’s now in their DNA not to warehouse salable product.
It’s a no win situation – the armchair experts will criticize Apple either way.
looks like they’re trying to do a Walt dance
These armchair critics make me f*cking sick. They all think they can run a company better than Apple can. How the hell did they think Apple became the wealthiest tech company on the planet? By screwing things up? Apple is basically building nothing but blockbuster products in various categories. I honestly don’t know how a company can anticipate overwhelming demand without seriously going out on a limb.
I really feel bad for those employees at Foxconn. Everyone is was a uproar over Apple somehow driving those employees to suicide through overwork and yet the same people are bitching and moaning that they can’t get their iDevices soon enough. I know those Foxconn employees are working their asses off with probably no vacation time and probably have to do forced overtime. Apple allotted a certain amount of iPad 2s to be produced which was supposed to be about 5 million a month. That’s still no guarantee that everyone that wants an iPad will get one the first month. So what is this griping about Apple fouling up its logistics? Foxconn can’t possibly build an unlimited amount of iPads a month and that’s all there is to it.
I’m an Apple shareholder and hold hundreds of shares and I understand what Apple has to deal with and I’m not angry with Apple for not being able to supply everyone that wants an iPad 2 or iPhone immediately. It’s not a life and death device, so let the consumers wait. If they really decide to buy a competitors product then that’s their choice and maybe also their loss.
this was the most stupid MDN take EVER.
like all Enderle’s and Dvorak’s of the world, this take assumes they can run the company better.
Hear! Hear!
If Apple had doubled supply for launch as suggested by MDN, then they’d have sold twice as many iPad 2 units as they have.
So, in this area, MDN actually can run the company better.
your wisdom amazes me.
I have an even better idea: why don’t they simply offer the iPad 2 as a download?
So everyone here wants Apple to start acting like the hated Analysts and just pull a number out of the air or some nether region huh?. The products Apple has been introducing have been far far bigger sellers than Apple imagined. How do you anticipate how well a new product will sell at introduction. Using previous numbers? That’s what Apple did with the iPad 2, used the iPad 1 numbers. Unfortunately the demand was far greater by a factor of about 4. Who would have been able to anticipate that? So I guess next product intro you would prefer that Apple consult with Walt?
The problem is that it costs a lot of money to tool up a factory to build iPads or any other such device. If you want to build twice as many per day, you need twice as many lines.
In order to handle the initial surge of orders without delays, they’d need to build far more capacity than they need for the rest of the year.
On the other hand, if Apple is building capacity to make 40 million iPads a year, as has been reported, that’s a capacity of 3.3 million per month. They’ve sold all the iPads they had on hand plus 4-5 weeks’ worth — probably 4 to 5 million in a few days.
Apparently, Apple believes that absence makes the heart grow fonder. Who knows, they could be right! Another reason for people to stand on lines, create press, stand out. Who stands on lines for Zunes or Android?
Apple’s use of cutting edge technologies and it’s obsession with thin products makes ramping up production if you wish to have any kind of consistent quality. Otherwise, every time Apple pushes the envelope those who fabricate or assemble the damn thing have to rethink how it is made in quantity and that sometimes means new equipment, worker retraining or whole new processes. Ask any Industrial Engineer.
I love my iPad 2. Got it as an open-box from Best Buy, with a 10% Disount. Target and Apple Store in Northern Virginia are getting them in on a regular basis. Walked in Target yesterday and they had 20.
Lack of supply isn’t a problem, lack of demand is. Just ask Moto about Xoom or M$ about Zune.
Nintendo didn’t try to produce more Wii’s when the demand was superhot. You had to search high and low, follow rumours and stand in long lines months after it was released.I bet that not going to happen again, except for Apple. of course. 🙂
One problem is that Apple run’s so far ahead of other companies technologically, they are often using parts that only one company is even capable of make…. touch screens have been a tough one… buying all there is, there just isn’t more… Hence hard to compete. They push their suppliers (almost) as hard as they push their employees… they must deliver to their commitments, no excuses.
Foxconn spent Billions last year to buy prototype equipment to make iphones faster… equipment that was designed to be used for full production… so Foxconn just bought all the prototyping equipment there was and kept it running night and day… Fortune did an interview with Foxconn founder last year, this was an example of what lengths Foxconn will go to…
What is worrisome about Japan disaster is – What parts are being supplied that ONLY the Japanese supplier can provide to Apple/Foxconn, at any price?
Idiots! Over $60,000,000,000 in the bank says that not only can Apple prepay for every wafer or chip they need now plus prepay for what they want NEXT YEAR! If Apple wants, they could buy the chip and wafer manufactures and have 100% of what they make!
What is wrong with all these DEEP thinking talking heads.
Buy up all the 2011 and 2012 supplies now and watch the prices jump for what ever scraps the rest find! Those iPad Killers will be going for $1,000 to $1,500 each. Economics … Supply … Demand … The big dog eats first!
I know they keep mentioning the possible delays in Japan, but today my order shows its being prepared for shipment. And originally it told me that the expected ship date was April 1st. So its shipping much earlier than expected.