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Is Apple Experiencing Production Problems with the iPad Mini?

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A news capsule this week issued by SiliconValley.com noted that production problems continue to plague Apple and specifically its iPad Mini tablet, but they should be resolved early next year, according to a report by Taiwan-based DigiTimes. According to the DigiTimes commentary (paid subscription required to access content), production of Apple’s iPad Minis may fall as much as 40 percent below projections for the fourth quarter of 2012 due to problems with both the manufacturing yield of the LCD panels, as well as shortages of component supply.  The panel problems extend to the 21.5 inch and 27-inch iMac line as well, but later release dates should allow production to catch up and eliminate the backlog by Q1 2013, the report said.

DigiTimes points to supplier AU Optronics as experiencing continuing problems in production yield causing that vendor’s prior commitment of 40 percent of target supply, to actually have a run rate of 22 percent of panel supply for the iPad Mini.  It notes that Apple might experience a shortfall of up to 4 million units in the current 4th quarter, largely as a result of production delays at AU Optronics.

In September, DigiTimes reported that Apple had begun to shift the bulk of volume LCD production to both Korea (LG Display) and Japan (Japan Display), but that Taiwan based AU Optronics was an exception, being designated as the new third supplier. Supply Chain Matters featured a previous commentary related to AU Optronics.

This being the holiday quarter with the largest shipping volume requirements, if these reports are accurate, it will present unfortunate timing for Apple in its quest to establish significant market share in the highly competitive 7 inch tablet market dominated by the Amazon Kindle.

This week, Supply Chain Matters tuned into a 2013 Information Technology Predictions webcast sponsored by top-tier industry analyst firm, IDC. (a former employer of this author) IDC’s #3 Prediction indicated that market unit shipments for mini tablets will jump from the current 33 percent, to 60 percent of the total tablet market in 2013, opening up more possibilities for access to electronic content, including use by schools and universities.

Obviously there is a lot at-stake in the current competitive battle of mini-tablets and supply problems are not going to be tolerated by Apple.

Stay tuned for additional efforts from Apple’s supply chain and logistics teams to scramble to fulfill every conceivable order for iPad Mini’s during the holidays.  Both FedEx and UPS will probably experience and even later surge in peak holiday deliveries as iPads descend from the skies.

Bob Ferrari

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  1. Adam Park says:

    It’s interesting to see the implications of supply chain problems and dealing with a new vendor. Obviously Apple has significant buyer power as they have consistently dominated their respective market, in this case tablets. As tablets are becoming more popular, Apple should consider strategic sourcing of their product to key suppliers that have developed a relationship over a prolonged period of time. With the shopping season up and coming, Apple will need to consider alternative options to sourcing new products, like the iPad mini, with less emphasis on cost-savings and production lead times (assuming these were the criteria that led to the selection of a new supplier).