Why Aren't There Enough iPads to Go Around?
Well, that was quick.
It's been just five days since Apple (NAS: AAPL) took the wraps off of the new iPad last week, and the Mac maker has already officially sold out of pre-orders for the new device. The company said in a statement, "Customer response to the new iPad has been off the charts," but it opted not to break out any juicy figures.
New orders placed through Apple now quote domestic shipping times as high as two to three weeks for all models, although the company always reserves an allotment for retail walk-ins on launch day, which also promises to deliver the long lines and media spectacles that typify Apple product launches.
There are a few potential culprits for iPad supply shortages, including the fact that the tablet is seeing an aggressive global rollout on launch day that spans the United States, Canada, Japan, and much of Europe, among others. An additional 25 countries make the list a week after that, so Apple needs to reserve some units for every country.
The likelier cause is that the device's biggest selling point, the new Retina Display, is causing production bottlenecks and limiting supply as panel suppliers have difficulties ramping up yields. According to NPD Group's DisplaySearch, Apple is tapping three separate display suppliers: Samsung, LG Display (NYS: LPL) , and Sharp. DisplaySearch analyst Richard Shim says the high-resolution panel is presenting manufacturing challenges.
It's unlikely that any of the other components, like the world-mode baseband chip (or similar variant) from Qualcomm (NAS: QCOM) that's probably inside, would see the same types of shortages, while the new iPad's display is the first panel with such high pixel density to be manufactured on such a large scale. Apple explained that to pack in that many pixels, it needed to elevate the pixels to separate them from the electrical signals so as to avoid "cross-talk."
What we're probably looking at here refers to a technique that Cupertino did not invent, called Super High Aperture, or SHA. It involves applying a 3-micron-thick acrylic resin layer, and Sharp and JSR developed it years ago, but it was slow to take off because of its complexity, costs, and low yields.
You can probably expect to see some Google (NAS: GOOG) Android devices coming out soon with such displays, since Samsung and LG Electronics, the parent of LG Display, are rather prolific Android OEMs themselves.
Meanwhile, longtime Apple analyst Gene Munster of Piper Jaffray expects Cupertino to sell 9 million iPads this quarter. The shortages also create opportunities for ambitious scalpers looking to capitalize on excess demand, while iPad scarcity will only make buyers want it even more. For now, there just aren't enough new iPads to go around.
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At the time this article was published Fool contributor Evan Niu has sold bullish put spreads on Qualcomm and owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Apple, Google, and Qualcomm. Motley Fool newsletter services have recommended buying shares of Apple and Google and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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