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Apple's Well-Fortified Supply Chain Can Handle The Sharp Scare

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Apple SupplyChainApple’s famed supply-chain could face a stern test this holiday season.

Having already seen the enthusiasm with which the iPhone 4S was welcomed last holiday season, many expect the same euphoria following the launch of the iPhone 5 this year to be the biggest device upgrade cycle in Apple’s history.

While the demand for this device is, in all likelihood, set to touch all-time highs, Apple’s main worry will be matching the high demand with supply. In this regard, concerns that Apple may have a tough time meeting iPhone 5 demand are being raised, with a couple of reports claiming that one of Apple’s key partners, Sharp Corp, has fallen behind on its production of screens for the iPhone 5 due to high costs and ‘manufacturing difficulties’.

Considering that the iPhone alone constitutes over 55% of Apple’s value by our estimates, such rumors, if true, can have a big impact on Apple’s valuation. Rumors about the launch of a new and much improved iPhone 5 have already caused sales to be muted last quarter and are expected to affect sales this quarter as well, making it very important for Apple to make up for these losses in the holiday quarter. At the same time, Samsung has overtaken Apple in overall smartphone sales and is gradually growing its presence in the high-end of the market, threatening Apple in a segment that it has historically dominated. It will therefore be to Apple’s detriment if it is unable to meet iPhone demand during a quarter that is expected to be exceedingly phenomenal for the company.

However, this is not the first time such concerns have been raised ahead of an important Apple launch. Earlier this year, just ahead of the release of the new iPad, similar reports had emerged with claims that Sharp and a few other display makers were facing problems manufacturing Retina displays on such a large scale. The new iPad launch, as we all now know, was a huge success and Apple broke its own quarterly sales record for the iPad last quarter. Last year as well, Apple managed to navigate the threatening Japanese earthquake and tsunami well to lessen the supply impact on its sales. With a long history of strong supply-chain management, Apple should be able to use its well-diversified list of partners and keen purchase planning to mitigate the impact of one supplier not meeting targets...Read more on Forbes.

Last modified on Tuesday, 11 September 2012 08:16

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