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iPad Mini Sales Spat Puts Focus on Apple Suppliers

iPad Mini Sales Spat Puts Focus on Apple Suppliers

Apple is famous for keeping its supply chain partners under strict gag orders. So when the CEO of an iPad mini manufacturer reportedly blamed his declining revenue on that device's slowing sales, ears perked up all over Wall Street. The CEO denied mentioning any specific product, however, and industry watchers point to other factors that could impact Apple's sales.

By John P. Mello Jr. MacNewsWorld ECT News Network
05/10/13 5:00 AM PT

Don't blame Jason Cheng for the latest news that iPad mini sales may be declining in the second quarter.

Cheng is CEO of Pegatron, an Apple supplier based in Taiwan, who this week reportedly blamed declining iPad mini sales for contributing to the company's flagging revenues.

Cheng denies he made any comments about the iPad mini or any other specific product.

The CEO could not be reached for comment for this story, but on the company's website, it issued the following statement:

"In response to the news reporting from the media concerning Pegatron's revenue in second half of 2013, Pegatron would like to clarify herein that it is purely media's speculation and interpretation. Pegatron did not issue any financial forecast, nor any forecast data regarding the Company's revenue."

Hiring Spree

Following the report by Bloomberg of Cheng's remarks, Pegatron -- an assembler of iPhones and iPads as well as Microsoft Surface tablets -- reported it would be boosting its current workforce of 100,000 by 40 percent during the second half of the year.

The news of the hiring spree is believed to be related to Apple ramping up production for new iPhone and iPad products in the fall.

During the quarter that ended in March, Pegatron had net profits of US$78.59 million, an 81 percent increase over the same period in 2012.

Even if Pegatron were producing fewer iPad minis, it wouldn't necessarily be a sign of declining sales.

"You can't take any claim from any one manufacturer and use it to extrapolate anything about Apple sales," Carl Howe, research director for the Yankee Group, told MacNewsWorld.

"It's because Apple does a lot of dynamic balancing among their manufacturing partners," he said. "Just because one manufacturer has gone down doesn't mean another manufacturer has not gone up by a similar amount."

Selling Well

A single supplier isn't a good indicator of sales trends, said Van L. Baker, research vice president for mobility at Gartner.

"We're certainly not seeing any fall off in demand for tablets," he told MacNewsWorld. "We see them selling pretty robustly. Android is gaining some traction, probably at the expense of iOS devices to a degree, but it's not like the bottom is falling out of the iPad market by any stretch."

There are many explanations for Apple reducing orders with an individual supplier. "Apple could be transitioning from one design to another and that supplier's components are not going to be used in the new design," Baker said.

"To assume that a demand for a component means the demand for the iPad mini is dropping significantly is getting ahead of what the reality is," he added. "The Mini is doing quite well."

Tablet King Falls

While sales may not be slowing, demand from suppliers may be dropping off from initial levels, noted Jeff Orr, a mobile devices analyst with ABI Research.

As Apple had to ramp up manufacturing for the product and fill the inventory channel, which has taken months, it had to make steep demands on its suppliers. "Now, that's turning into a normal run rate business, Orr told MacNewsWorld.

"The tablet market is very strong," he said, although unit shipments are down on a quarter-to-quarter basis. "Q1 of any calendar year is a challenging period for any technology segment because of seasonality of consumer purchase behavior."

The big shift in the market now is the fall from prominence of the 10-inch tablet as seven-inch tablets begin to get traction, Orr said.

"That's been led by the introduction of the iPad mini, but it's been a mainstay for the Android tablet," he added.

Despite the introduction of the mini, Apple has seen its tablet market share decline. "The Android portion of the market has been growing," Orr said. "Depending on the data you're looking at, some might argue that late last year, Android became the most predominant operating system for tablets."

That's not happening yet, but it's getting close, he said. "We're getting close to the tipping point where Android becomes a more commonly found operating system on tablets than iOS."


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