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Apple’s Supply Chain Pain

What's wrong with Apple?

In recent days, the consumer electronics giant has been staggered on several fronts:

    • Citigroup cut its outlook for Apple stock (Nasdaq: AAPL), citing reduced sales for the iPad and iPhone models, chatter its analysts heard from the supply chain.
    • Digitimes, which sometimes shoots first and asks questions later, reports that “Apple is currently adjusting shipment estimates for its iPad and iPad mini products in 2013 to 33 million and 55 million, respectively, according to industry sources.”
    • Topeka Capital analyst Brian White, who closely tracks Apple, said his February “Apple Monitor” cratered.
  • Digitimes (again) reports that Apple's touchscreen sensor supplier, Nissha, can’t keep up with expected demand.

There has been a lot of hand-wringing over these reports, which would be less vigorous if the company's stock hadn't tanked in recent months.

But let's remember this: Apple's has always had supply chain issues. Think back to rollouts of the Macintosh and iMacs. You could set your watch to the inevitable stories that the products would be on back order because the supply chain couldn't keep up with demand. If anything, there's an interesting story emerging in the wake of Samsung’s small investment in panel maker Sharp, which supplies both companies.

Apple is no supply-chain slouch, as evidenced by this interesting anecdote on laser machines it needed a few years ago. Each year, the company is ranked among the top 5 supply chain management companies in the world.

But consider this story from another perspective: It probably has little to do with the overall health of electronics demand for consumer devices. Samsung and other Android device providers are chugging away.

The bottom line simply could be upgrade fatigue, as Douglas Alexander pointed out last week in Apple iPad: iThink iWon’t Upgrade. In other words, today's devices are victims of their own innovation success, as well as the rise of cloud services.

And as for rumors, Apple CEO Tim Cook said it best in an analyst call:

I'd stress that even if a particular data point were to be factual, it would be impossible to interpret the effect on our business. Our supply chain is very complex… there's a long list of things that would make any single data point not a great proxy for what's going on.

17 comments on “Apple’s Supply Chain Pain

  1. Susan Fourtané
    March 13, 2013

    Brian, 

    I believe all the supply chain issues that Apple is experiencing have a lot to do with the demanding frequency of launching a new generation iProduct every six months or so. It's too soon for everyone, even for consumers. 

    -Susan

  2. Paumanok Publications, Inc.
    March 13, 2013

    First, Brian, the Digitimes comment; “Shoot First, etc.”- very funny. Second, on Apple, we can trace dramatic shifts in share in the component supply chain based upon specific vendor relationships with Apple.  We also see it to a lesser degree with Samsung- but mind you, we see it with no one else.  I would dare say that as Europe improves and the BRIC and MINT economies get rolling again, that Apple will be just fine and dandy.  They do form and function like no one else's business, and before you know it, we'll probably have an iWall to look at too. Just saying.

  3. SunitaT
    March 13, 2013

    I would dare say that as Europe improves and the BRIC and MINT economies get rolling again, that Apple will be just fine and dandy.

    @Paumanok, Infact Apple is making strides in India at the expense of its immediate competitors, as it almost trebled its market share in terms of smartphone revenue to come in second behind Samsung and ahead of BlackBerry in the last quarter of 2012.

  4. _hm
    March 13, 2013

    Apple always dreams great innovations and achieves them to everone's surprise. They conseder each obstcle, problem as an opportunity and do not stop at what other people thinsk or write. That is very effective for Apple to move forward and be cynosure of the world.

     

  5. prabhakar_deosthali
    March 14, 2013

    In my opinion , Apple's new product introduction plans are so dynamic that there is no complacency for its suppliers . The suppliers have to constantly adjust to the dynamics of doing business with Apple and that mat be the reason for some disruptions in the Apple's supply chain that we see.

  6. Daniel
    March 14, 2013

    “I believe all the supply chain issues that Apple is experiencing have a lot to do with the demanding frequency of launching a new generation iProduct every six months or so. It's too soon for everyone, even for consumers. “

    Susan, when competitors like Samsung & Sony are releasing new products very frequently, Apple cannot sustain with a single products for more than 6 months. So Apple also has to update the market with more release /new product by, atleast one per quarter.

  7. Susan Fourtané
    March 14, 2013

    Jacob, 

    Don't you think the products start losing something in the fast preocess? New features, some innovation, maybe quality can be at risk? Is this necessary? 

    -Susan  

  8. Eldredge
    March 14, 2013

    @Jacob – I would agree that Apple probably needs to come out frequently with new products. But they aren't going to get the same customer set coming back every 6 months to upgrade, and that may contrast with the sales volume associated with the introduction of a totally new technology.

  9. ahdand
    March 14, 2013

    @Jacob: True they need to come up with new products but they should also think of making things which other devices haven't produced, like something they did when they invented iPhone for the 1st time upto their upgrades till iPhone4s.

  10. Eldredge
    March 14, 2013

    @ Jacob – Looks like yuou have generated some discussion! You do make the valid point that competition often drives the way companies need to respond in the marketplace.

  11. Daniel
    March 21, 2013

    Eldireg, without frequent updation how anyone can sustain the market for a long term. Its hardly very difficult.

  12. Daniel
    March 21, 2013

    “I would agree that Apple probably needs to come out frequently with new products. But they aren't going to get the same customer set coming back every 6 months to upgrade, and that may contrast with the sales volume associated with the introduction of a totally new technology.”

    Eldredge, the issue is, whatever the new features Apple are incorporating to their new versions are copying by their competitor within 3 months of releasing the new product. So thereafter any advance features in their competitor's products can have an edge over Apple products. That's why i suggest for a frequent up gradation of features from Apple.

  13. Daniel
    March 21, 2013

    “Don't you think the products start losing something in the fast preocess? New features, some innovation, maybe quality can be at risk? Is this necessary? “

    Susan, for sustainability of the product these are important factors but if they want to hold either market share or customer base, frequent up gradation/features are an important factor. Do you have any thoughts in that direction?

  14. Susan Fourtané
    March 21, 2013

    Jacob, 

    I don't see latest upgrades as anything that is turning too positive. Didn't we have lately an article here about why people are not upgrading to the newest iPad, for example? Take the three latest generations of a any product and tell me what great upgrades you see.

    What justifies the upgrade? Frequent upgrades is not working well, and it will be worse.  

    -Susan

     

  15. Daniel
    March 26, 2013

    “Take the three latest generations of a any product and tell me what great upgrades you see. What justifies the upgrade? A frequent upgrade is not working well, and it will be worse.”

    When market competition is tough, either they have to update the device or has to release an alternate product. That's the one reason Samsung is frequently releasing new products.

  16. Susan Fourtané
    March 27, 2013

    Jacob, 

    Apple might be releasing a new phone together with the release of the Apple TV this year. If not this year, 2014 is going to be a year of new iProducts for Apple. 

    -Susan

  17. Daniel
    April 4, 2013

    “Apple might be releasing a new phone together with the release of the Apple TV this year. If not this year, 2014 is going to be a year of new iProducts for Apple. “

    Susan, I think that's a big Gap and competitors may release more products in this gap for capturing the markets.

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