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The Mystery of the Missing iPad Parts

By Erika Morphy MacNewsWorld ECT News Network
Sep 27, 2011 8:30 AM PT

Apple has scaled back orders for iPad parts, according to JPMorgan Chase, which cited several vendor reports suggesting a hefty 25 percent reduction for the fourth quarter.

The Mystery of the Missing iPad Parts

Apple did not respond to MacNewsWorld's request to comment on the report.

There is a good deal of skepticism about its accuracy, though, along with plenty of conjectures that could explain the change, from the mundane (geographical redistribution) to the sublime (design changes in the works).

The Fine Art of Forecasting

"I think there is a significant possibility that the report is wrong," said Rob Walch, host of Today in iOS. "And even if it is true -- which is a big if -- there are a number of reasons why it is irrelevant."

That is, it would not likely point to a slowdown in demand for the iPad, he told MacNewsWorld.

There could be any number of explanations for order reductions, according to Walch. One possibility, though he considered it the least likely, is that it was an intentional maneuver.

"Apple could have deliberately overbooked its forecast in order to tie up capacity as a Machiavellian maneuver to keep competitors scrambling for parts," he explained.

It's more likely, though, that a slowdown in orders in China merely means that Apple is getting ready to shift production to its factory in Brazil, reasoned Walch.

The lack of any confirmation from Apple leaves the matter open to question, noted Azita Arvani of the Arvani Group.

"Even if the report is accurate, all it is indicating is that the Asian vendors may have gotten lower orders in Q4," she told MacNewsWorld, which in and of itself does not translate into lower demand for iPads.

"Quite a few different supply chain explanations could apply," said Arvani. "It may be that Apple is distributing its supply chain in various geographies."

Another scenario is that Apple could be tweaking its supply to optimize post-holiday inventories, she suggested.

The Expectation-Experience Gap

One intriguing possibility is that Apple may have accelerated the development and release of a new product for the holidays.

"Think about it," said David Nour, CEO of the Nour Group. "If the iPad 3 or iPad nano is a different form factor, they won't need as many of the same parts."

Another possibility is that Apple's current supply is strong, and that based on general economic conditions, Apple has decided to lower its own expectations, he told MacNewsWorld.

The worst case, from Apple's perspective, is that it has become concerned about the competitive landscape, with the impending launch of the new Amazon tablet, and is adjusting its expectations accordingly.

Apple clearly understands that relationships -- with suppliers, customers, and the market -- can turn sour with misaligned expectations, Nour said. "In my experience, they work extremely hard to align expectations early and often not to surprise anyone, particularly themselves, with the expectation-experience gap."

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