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iPad Delay: Is Apple's Supply Chain Allergic to New iThings?

By Richard Adhikari MacNewsWorld ECT News Network
Apr 14, 2010 11:59 AM PT

Apple on Wednesday announced that it would delay international shipments of its new iPad tablet computer. It blamed stronger-than-expected demand in the United States.

iPad Delay: Is Apple's Supply Chain Allergic to New iThings?

Apple will now begin taking online pre-orders from international markets and announce international pricing May 10.

This is the second time that international shipments of the iPad have been delayed in the product's short history; iMac shipments were also delayed, forcing Apple to apologize in December.

Does Apple have a serious supply chain problem? Or are the delays -- rooted perhaps in a strong tendency to keep early production numbers conservative -- a savvy marketing strategy by a company that has mastered the art?

Pushing Back the Shipments

"Although we have delivered more than 500,000 iPads during its first week, demand is far higher than we predicted, and will likely continue to exceed our supply over the next several weeks," reads Apple's statement on the matter. "We have also taken a large number of pre-orders for iPad 3G models for delivery by the end of April."

This "surprisingly strong" demand forced Apple to make "the difficult decision to postpone the international launch" of the iPad by one month, until the end of May.

"We know that many international customers waiting to buy an iPad will be disappointed by this news, but we hope they will be pleased to learn the reason -- the iPad is a runaway success in the U.S. thus far," Apple said.

"Apple's PR machine is best-in-class at taking a negative and turning it into a positive," John Jacobs, director of notebook market research at DisplaySearch, told MacNewsWorld. "Nothing screams success and the popularity of the device, and helps keep it in front of consumers' eyes like publicity, and that's what Apple's getting."

Accurate sales figures for the iPad are difficult to pin down, as Apple has not distinguished between pre-orders, shipments into the distribution chain, and actual sales.

Apple did not respond to requests for comment by press time.

Working on the Supply Chain Gang

This latest delay is the second time Apple has pushed back shipments of the iPad. Back in January, it had announced that the device would be sold worldwide in late March, but after analysts reported delays in production, it postponed the U.S. launch of the iPad to April 3 and the worldwide launch to late April.

Both the WiFi and 3G versions of the iPad were originally scheduled for launch in Japan, Canada, Australia, France, Germany, Italy, Spain, Switzerland and the UK at the end of April.

What's causing the delays? A combination of both supply-chain problems and marketing strategy, Chris Hazelton, a research director at the 451 Group, told MacNewsWorld.

"Apple's strongest market is here in the U.S., and it may not want to risk having iPads on the shelf in international markets when they could be snapped up here in the U.S.," he explained. "Also, Apple may have fewer iPads available for the international market than it would like."

More Problems Than Meet the Eye?

Recall that Apple also had production problems with certain models of its latest iMac lineup after launching that series in October, and it had to apologize in December for delaying shipments of the computer.

As is the case with the iPads, Cupertino blamed the delays on unexpectedly strong demand. However, it did not say whether the delays were due to the problems customers were having with some iMacs' displays.

Hundreds of irate customers had complained about problems with the iMac's screen, and Cupertino reportedly stopped production temporarily. In February, Apple released its second firmware update in three months to resolve screen issues with the 27-inch iMac.

The question is, why are we seeing shipment problems, first with the iMac and now with the iPad?

Production problems are definitely a possibility with the iPad, at least, because of a combination of technical specs, normal production issues and quality issues, DisplaySearch's Jacobs said.

"The iPad's display is very high-end -- it's a custom size, and it's more complicated than a generic notebook display," Jacobs pointed out. "Further, when you get something like this, there can be some kinks and wrinkles in the early stages of production that you have to iron out. Also, Apple is famous for its high quality requirements, which means a larger number of screens will initially fail its tests."

Apple will solve these problems soon, Jacobs expects. "As production continues, Apple's display engineers will learn more about the manufacturing process, and they'll probably be able to resolve these issues within about a month," he said.

Competition? What Competition?

Several of Apple's rivals are hard at work producing tablet PCs, but Jacobs dismissed most of the earlier entrants as little threat to Apple.

"Those are smaller players," he explained. "HP has something up its sleeves which will probably be available in the third or fourth quarter, and Lenovo is pushing out shipment dates for its tablet PC hybrid from June or July by another month. Apple's got a little bit of bad luck, but everyone else is delayed in their launches."

That will give Cupertino enough time to sort out its supply chain, so by the time it gets international, it will still have a head start on most serious competitors, Jacobs said. "This delay in international shipments is a small problem for Apple, not a big one."


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