iPad 2 production affected by component and labor shortages – Report

Thu, May 12, 2011


By Sarah Petit:

With mounting iPhone 4 and iPad 2 demand, a new report from Digitimes claims that Foxconn, Apple’s manufacturing partner, is facing a shortage of not only component parts, but of labor as well. As a result, both iPhone 4 and iPad 2 shipments may be adversely affected during the current quarter.

Addressing the rumor, Foxconn emphasized that it’s doing all its can to fulfill the orders of its clients, but didn’t elaborate on reports of labor shortages.

During the most recent quarter, Apple sold an impressive 18.7 million iPhones, a 113% increase year over year. iPad sales checked in at 4.69 million units – a figure which while still impressive was markedly below analyst expectations. Apple COO Tim Cook, however, explained that the number would have been much higher had it not been for supply shortages and what he termed the “mother of all backlogs.” Indeed, Cook made a point of noting that Apple sold every iPad it manufactured during the quarter.

All that said, Apple certainly wants to shore up supply as quickly as possible, and news of component and labor shortages is not at all encouraging.

As for Foxconn’s plants in Chengdu, which are used mainly for iPad 2 manufacturing, although the company planned 52 production lines at the plants for manufacturing iPad with annual capacity already surpassing 40 million units, as Japan’s earthquake seriously impacted component supplies such as power amplifiers and memory to the plants, while the plants’ labor is also falling short, supplies of iPad 2 are still mainly from its plants in Shenzhen. As a result, Foxconn may have difficulty in satisfying Apple’s demand for supplying an average of 2.5-3 million units of iPad 2 each month in the second quarter, the sources noted.

Apple has told its partners that it wants to ship approximately 10-10.5 million iPad 2 units during the second quarter and approximately 35-40 million units in 2011. That’s a tall order when things are running smoothly, but given the ongoing affects of the Japanese earthquakes and the disasterous Tsunami, it remains to be seen if Apple will be able to keep up with demand.

At the very least, Apple doesn’t have to worry about iPhone 5 shipments not keeping up with demand as Apple’s next-gen smartphone won’t hit the market until later this Fall. As a quick recap, the iPhone 5 will likely come with a larger edge to edge display and might come with an embedded 8 megapixel camera as well.



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