Apple CEO Tim Cook. Source: Wikimedia Commons.
If the rumors are to be believed,
newest product, the iWatch, will be announced at its Sept. 9
event but possibly won't ship until 2015 because of supply chain
issues. This was originally reported by Apple analyst Ming-Chi
Kuo, and subsequent memos have pushed back the launch date from
October to early next year.
Kuo has a pretty good track record on these things. Based on a
thorough analysis of Apple's supply chain, he has been relatively
accurate on delays. In fact, he predicted Apple's iPad Mini with
Retina display delay in 2013. In addition, he predicts a delay in
Apple's larger-size version of its newest iteration -- the iPhone
6, a 5.5-inch "phablet" model -- pushing the release date for
that unit back to 2015 as well.
So if two of Apple's three products for this event are
delayed, coupled with the iPad Mini Retina last year, does this
mean Apple's supply chain presents a risk of sorts to the
Supply chains are more difficult than they appear
Most consumers are relatively unaware of supply chains, but let's
not understate their importance. Simply put, supply chain
management is the process of logistics -- how to create value by
moving raw materials to finished products to customer delivery.
And while it seems rather boring, and in some ways it is, supply
chain management can add value or destroy it.
A slightly ironic point is that these issues seemed to crop up
after Tim Cook took the reins. Widely considered a "supply chain
maven" among the analyst crowd, Cook started his Apple career as
a senior vice president for worldwide operations. Through a
relentless focus, he quickly fixed the supply chain, eliminating
lags from months to days. Cook was promoted to chief operating
officer before becoming the company CEO in the wake of Steve
Jobs' declining health.
The issue with revolutionary products ...
Compounding Apple's supply chain problems is its visionary
product line. That's a constant issue with revolutionary products
-- nobody else has combined these products in the same way
before, so the raw materials and work-in-progress inventory
processes need to be updated.
It appears there is generally a similar sticking point when it
comes to recent supply chain hiccups with displays, especially
when combined with a new form factor and new technologies.
Apple's iPad Mini Retina combined a new, smaller form factor for
its iPad line with the improved and updated Retina display. In
addition, reports blame issues with the display/touch-panel
interaction for the holdup with the larger, "phablet-like,"
version of the iPhone 6 and its sapphire cover lens for the
Is this a concern for Apple investors?
There's not enough here for long-term investors to be overly
concerned with. Even if the rumors are true, Apple appears to be
on track to release its 4.7-inch iPhone on schedule. Look for
that model to sell briskly during the North American seasonally
heavy quarter, like all prior iterations.
The 5.5-inch phablet unit should do well in the Asia-Pacific
region, where phablets are more popular and the holiday season
isn't as important to move units -- therefore, the delay isn't as
important. The short-term risk is that there will be holdouts for
the 5.5-inch model in the U.S., but the phablet (defined as 5
inches and above) form factor isn't as popular here, and this is
only a short-term concern.
As far as the smartwatch is concerned, this is incremental
revenue and profit. Therefore, these expectations don't appear to
be valued into the stock. That hasn't stopped a few analysts from
attempting to model -- Morgan Stanley's Katy Huberty anticipated
between 30 million and 60 million units in its first 12 months of
sales at a price of $300 apiece. However, subsequent reports peg
the average selling price at $400 per unit.
As an investor, you'd like for your company to have as few delays
as possible. With that being said, long-term investors should
give Apple a pass here. As Apple continues to bring new and
exciting technologies to its products, at times there will be
delays in both supply and manufacturing processes. In addition,
Apple's going to take its time bringing a cohesive,
end-user-focused, product to market. It isn't always fast, but
it's worth waiting for.
Leaked: Apple's next smart device (warning -- it may
Apple recently recruited a secret-development "dream team" to
guarantee that its newest smart device was kept hidden from the
public for as long as possible. But the secret is out, and some
early viewers are claiming that its everyday impact could trump
the iPod, iPhone,
the iPad. In fact, ABI Research predicts that 485
million of this type of device will be sold per year. But one
small company makes Apple's gadget possible. And its
stock price has nearly unlimited room to run for early
in-the-know investors. To be one of them, and see Apple's
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Is Apple's Supply Chain a Risk to the
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