supply

Following some statistical analysis from yesterday that indicated the iPhone 6 usage ratio was beginning to favor iPhone 6 Plus, Digitimes now reports that Apple is following through on market shifts with production schedule adjustments.

Digitimes says that with iPhone 6 Plus exceeding expectations, Apple has asked the supply chain to move some production away from its 4.7 inch phone. This will mean that shipments for iPhone 6 will fall by 3-4 million units to accommodate the change in production lines.

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A new report by Digitimes says that, contrary to public opinion, the iPhone 6 Plus is receiving more orders after beating initial demand expectations. The report says 60% of iPhone production is iPhone 6 Plus units, which may be interpreted as the iPhone 6 Plus being the more popular model. It also says that Foxconn is responsible for iPhone 6 Plus supply, whereas Pegatron is taking up iPhone 6 output.

However, Digitimes doesn’t have the best track record and this information sort of defies other evidence. Firstly, it is important to note that production does not correlate proportionally to demand. It was well publicised that the iPhone 6 Plus was supply-constrained in the runup to release. The burst of iPhone 6 Plus production now may simply be restoring the balance, clearing the backlog of orders.

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Following several reports this month and hints from Tim Cook that Retina iPad mini stock could be in short supply when the device launches next month, the hit and miss DigiTimes reports today that the shortages are due to limited supply of displays from Apple’s supplier Sharp. Specifically, the report claims that Sharp’s “Oxide TFT process is seeing low yield rates” leading to a less than ideal supply of  7.9-inch Retina panels. Sharp accounts for around 40% of the displays for iPad mini with Retina display production, while LG Display is providing the other approximately 60%, according to the report:
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According to a report from Reuters, citing a statement from Foxconn Chairman Terry Gou, Apple’s assembler is having a hard time keeping up with iPhone 5 demand. Gou confirmed previous rumors that the company is indeed “falling short” of meeting supply for iPhones and its other unit, Foxconn International Holdings, is assisting with production:

“It’s not easy to make the iPhones. We are falling short of meeting the huge demand,” Foxconn Chairman Terry Gou told reporters after a business forum.

Following the launch of the iPhone 5, reports claimed employees at Foxconn’s Zhengzhou plant went on strike over quality control concerns and lack of training. The same quality control issues were linked to scratching found out of the box on some iPhone 5 units, but it’s unclear how much these setbacks have contributed to iPhone 5 delays. Another unnamed executive speaking to The Wall Street Journal last month said the iPhone 5 is “the most difficult device that Foxconn has ever assembled. To make it light and thin, the design is very complicated.”

To speed up production of new iPhones, specifically the production of display components, Reuters suggested Apple could provide cash incentives to Sharp, one of its keep suppliers that was thought to have contributed to initial low supplies. Following rumors yesterday that Apple might even be considering making further investments in the failing company, Asymco’s Horace Dediu (via Fortune) speculated today that a $2.3 billion discrepancy in Apple’s 2012 financials might have already went to Sharp:
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iPad mini window display from NorthStar Mall, San Antonio (via <a href="https://twitter.com/alanweinkrantz/status/264338171469369344">@alanweinkrantz</a>)

iPad mini officially went on sale at 8 a.m. this morning and reports are already starting to flow in that many Apple Stores have sold out of initial stock. Topeka Capital’s Brian White released a note to clients this morning (via BusinessInsider) that noted all models of iPad mini sold out in just over two hours at Apple’s flagship Fifth Avenue New York City store. Before today’s launch, shipment dates for Apple’s online pre-orders of the device had been pushed back, while shipment dates for pre-ordered LTE models of the device were recently removed.

Now reports indicate stores in the United Kingdom, Singapore, Canada, and many other states from Alabama to Hawaii have sold out of initial supplies.

[tweet https://twitter.com/madfruitstand/status/264374161076523008]

It’s unclear just how much stock Apple had delivered to its various stores and resellers, but we noted earlier today that lines were much smaller than usual at many locations. The lines were most likely due to the fact today’s launch included just the Wi-Fi-only model, but it looks like Apple is still not able to meet demand in many locations. Some stores were rumored to get about 100 units, as noted in the tweet above, while we heard bigger stores received as many as 300.

It’s also not yet clear if supply of the new iPad mini will be held back by similar manufacturing troubles and supply constraints of which Apple is now experiencing with iPhone 5 and the new iMacs leading into the holidays.

Judging by the collection of tweets that we put together below, Apple is quickly selling out of initial iPad mini stock in many locations around the globe. Most stores are not expecting additional shipments today:

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With all the controversy surrounding Apple’s supply chains abroad, Foxconn, one of Apple’s biggest partners responsible for assembling the majority of its products, has received the brunt of criticisms. We already know what the Taipei-based assembler thought about Mike Daisey’s fabrications of working conditions at Foxconn plants, but today we get another first hand account from an actual Foxconn employee.

A report from China Business News (via MIC Gadget) profiled Foxconn worker and iPad assembler Wang Xiaoqiao (who opted to hide his real name). According to Wang, iPad line workers are beginning to work fewer hours and get more days off as supply meets demand. Wang said iPad production was ramped up in March, bringing assembly time from 10 hours a day down to 8 hours. However, he is not happy about working less. Wang explained:

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Digitimes is reporting Apple has turned to manufacturers other than LG Display (specifically Samsung and Chimei Innolux) due to issues with the 9.7-inch panel they’ve been producing for the iPad 2. Apparently LGD was not only unable to meet its July orders by approximately 1 million units, but also failed to meet Apple’s requirements in impact tests.

Due to the manufacturing issues with LGD, Digitimes reports they have now turned to alternate supplier (and rivals in the tablet market) Samsung. However, this may be only a temporary solution to the supply problems, as the report is quick to point out Samsung is directly competing with the iPad 2 with their Galaxy Tab 10.1 (the same device Apple just received a preliminary injunction for to halt sales in the EU).

According to the report:

“Samsung’s Galaxy Tab has head-on competition with the Apple iPad 2 in the end market. This would prevent Apple from sourcing more panels from Samsung.”

This might be an indication that Apple is focused on transitioning away from Android-related manufactures, if for no other reason, simply to avoid having to rely on their competition to supply vital components. Doesn’t look like LG’s  $500 million display deal with Apple will be getting extended anytime soon, and a recent lawsuit launched against Apple (linked back to LG) certainly doesn’t help either.

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