Developments: Supply chain checks suggest that Apple will lower iPad outlook
– Our channel checks suggest that Apple (AAPL US, NR) may reduce the indication it gives to suppliers for 2011 iPad shipments to c.35m units from 40-45m units. The new forecast may be given to key suppliers as early as next week.
– We have heard three possible explanations for the reduced guidance: 1) difficulties in the manufacturing process as thinner glass in the touch module is more easily cracked, 2) component shortages which may have been caused by the Japan earthquake; and 3) delay to the iPad 3 which is currently scheduled for launch in 4Q11. Apple’s website is showing that shipping time for all models is 4-5 weeks, which indicates that demand should not be the cause of the lower target.
– There was also a shortage of the iPad 1 soon after launch due to yield issues on both the company’s A4 processor and touch panel modules. These issues were solved within 3-4 months.
Sensitivities: Impact on supply chain earnings minimal
– We currently forecast Apple to ship 35m iPads in 2011. However, the company usually gives optimistic forecast to its suppliers to ensure sufficient components. As a result, we see potential risks to our current forecasts.
Notablecalls: Not making a call here given the hectic tape, but I do think this iPad2 tid-bit is not widely known yet.