Reasons for iPad manufacture decline

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JP Morgan Chase & Co Asia reported that the iPad 2 is set to suffer a decline of 25 per cent in Chinese production in its fourth quarter of 2011. Originally Apple had planned to meet orders of 17m to meet the Christmas demand. However after a revision, this number could be as low as 13m, due to a number of outside factors.

This information on the reduced manufacture of iPads has come from a number of vendors of components for the slate like device.

However, Mark Moscowitz of JP Morgan Chase & Co in the USstill suggests that the iPad will still manage to shift 10.9m in the autumn quarter and see a rise to 12m in the last quarter of the year.  This has been a rise of 9.25m in the previous summer period.

Amazon Kindle

Digitimes has suggested that the near future may see a reduction in the price of the iPad 2, especially with the advent of the Amazon Kindle Tablet in the near future, as well as the competition from the constantly decreasing price of numerous other Android tablets.  The iPad 2 currently retails at between $500-830 depending on the connectivity and memory features you choose.

This may not be far off the truth with the new Amazon device expected to do much of what the iPad 2 does, as well as having the huge support of all of Amazons book, video and music services.  This tablet is expected to come in at as low as $170 – feeding on the desire for low cost tablets evident in the recent HP Touchpad rushes after a $99 flash sale saw the devices whipped off the shelves in hours. Apple currently sells 73 per cent of all tablets, Google only 17 per cent – though this may be set to change.

Suggestions are that the Amazon Kindle could ramp up sales of 5m in its first quarter. These numbers were reported by Forrester research. Research suggests that Amazon’s ability to sell the hardware at a loss and its ability to make it back on software sold via Cloud memory and downloads, will make Amazon a very strong competitor for Apple.

This potential strength may also see developers create apps for the Amazon device – especially if it meets the figures projected by Forrester Research. Currently Honeycomb Apps languish at around the 300 mark, with many applications for the operating system coming from Google’s less than suitable mobile phone platform. This is in comparison to over 100,000 of similar apps for iPad.

Brazil to China

One suggestion is that Apple has simply moved 25 per cent of the production of iPad 2 from Brazil from China. Foxconn – who manufacture the iPad 2 – are ready to begin production in their Brazilian factory according to a press release from Aolizio Mercadante, the Brazilian Minister of Science and Technology.

Though, Brazil is not set to ship these tablets until the end of the last quarter according to reports, though this has not been made certain, or confirmed by either Foxconn or Apple. This could mean that manufacture has merely shifted from the Chinese plant to the Brazilian one and Apple are producing no less worldwide, but just less in China.

As is seen from the previous sales numbers the iPad is selling more than ever and projections do show that this is an upward trend – so the Brazil theory is definitely creditable. Building in Brazil would also prevent the issues that hampered Asian production happening again – an earthquake in Brazil would not cause problems in China and vica versa. This move would allow Apple to manage availability of the device on a world scale.

Apple still hasn’t released the new iPad 2 into all of the worlds markets and it is still being met with huge demand in anywhere it has not yet been sold in. This would ensure this demand could continue subject to most disasters.

IPad 3

Rumours have been around for a while now that the iPad 3 is set to be announced in the very near future. This release would see an obvious dip in the production of the iPad2 as Apple would need to begin manufacture of the newer device and there would almost certainly be a drain on resources if iPad 2 production was maintained at high levels.

Apple is supposedly at limit with its manufacture of the current generation of the iPad and this would certainly mean the new device could not meet necessary numbers if the previous device was being made at optimum levels. This may perhaps be the reason for the device being cut in manufactured numbers. A drop in iPad 2 production would free up the resources that would allow for iPad 3 production to begin and this is a suggestion being put forward in some areas.

Though, this suggestion may have logical grounds for attraction, it is unlikely that the iPad 3 will be released until the traditional April time. Though there have been proposals for an earlier release for the device, with stories of it being announced the same time as the new iPhone 5.

Over Ordering

There are still even more malevolent theories still. Some experts have accused Apple of over ordering on iPad 2s to try and ensure that they have a hold over supplies and the manufacturing capacity of the plants the tablets are produced in.

Apple produced 17-19m units in Q3 according to AAPL supply chain checks. His has been reduced to 11-13m for the Q4. This production increase in Q3 is perhaps to prevent any issues with production for the golden shopping period of Christmas.

Also, this effort at oversupply would mean that other companies who use Foxconn’s manufacturing plants will be limited as regards components and manufacturing time spent. Foxconn also manufacture for ASUS, Acer, Dell, Nokia and Sony – all of whom have tablets on the market and all of whom are in direct competition with Apple.

If Apple can ensure it receives manufacturing precedence over the aforementioned companies it can then control not only how many tablets it sells, but to an extent how many tablets its competitors can produce for sale. This would obviously leave Steve Job’s former company at a huge advantage over other tablet manufacturers. Of course Foxconn’s best selling tablet is the iPad and they are also Foxconn’s main phone manufacturing customer. With the advent of iPhone 5 and its production in Foxconn facilities it would be unlikely Foxconn would take a risk and complain about such a move.

Economy

There is also obviously speculation that demand for the devices has diminished, with much of this attributed to the fragile state of the world economy. IPad 1 and iPad 2 were both released into a relatively better economic situation, though recent months have seen fiscal issues worsen massively and an air of uncertainty hit world markets.

There is a strong belief in Europe that the device is an unnecessary device according to some and so popularity in Europe has been limited and is falling still RBS Asia analyst Wanli Wang. This suggestion has come just as Europe is struggling hugely financially – however unusually the iPad 3G 64GB model sells a third of all models of iPad in Europe and that is by far the most expensive model – so such economic worries may not be necessarily true.

Whether such worries relating to the world economy are true or not, Apple saw its share prices fall in the wake of such stories by3.2 per cent on the Nasdaq Stock Exchange.

A Number of Factors

Finally it has been suggested by Bloomberg that such suggestions are not true and that iPad2 sales are perfectly healthy.

Mark Moscowitz of JP Morgan Chase & Co has said that though supply chain vendors have seen a 25 per cent decrease in the sell in orders, or perhaps components – that such a thing is not actually a good proxy of the demand for the iPad 2. Apple may have not received a drop in demand for the product at all. It has been claimed that a lower number of components on order may be down to Apple having already over produced enough of the iPad to do for the time being and not a drop in sales.

Others however stake claims that Apple is merely just a little wary of the economy and the coming of the Amazon tablet.

The notion of a number of factors would make sense. The delicate world economy, alongside production factors as well as the coming of the Kindle would certainly make sense. The idea of the iPad 3 is unlikely to hugely affect the sales or production of the iPad 2 just yet – it is nearly 6 months in advance of release.

We will however see what becomes of sales and production in coming months – as we all know hindsight offers 20/20 vision.

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Author bio:

Caitlin Barker is a freelance writer and tech journalist. She writes articles covering a wide range of technology and internet subjects including how-to guides, reviews and second hand laptops and mobile phones buying advice including new and used iPhones, Blackberry and Android.


A Mechanical Design Engineer by profession, but passionate about Computers, software and anything that helps to learn something new or different. Love to do things which i don't know and dive into unknown territories.

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