Apple Inc is likely to cut its iPad orders to avoid an oversupply of the tablet computer and adjust its panel supplier mix, a Taipei-based analyst said yesterday.
“The growth momentum of worldwide tablet PCs has become weaker this year, partially due to market saturation,” said Charles Chou (周士雄), a senior industry analyst at the Market Intelligence & Consulting Institute (MIC, 產業情報研究所).
“For Apple, it is facing market share erosion by some ‘white-label’ vendors and smartphones with displays over 4 or 5 inches, leading to a more conservative forecast of its shipments,” he said in a telephone interview.
White-label vendors are companies that sell products or services without a registered brand name.
Chou said it bears watching whether consumers would delay purchases until the launch of Apple’s next-generation iPad later this year, or if the company is losing ground to rivals that offer cheaper products.
Late last year, Amazon.com Inc launched its 7-inch Kindle Fire at a price of US$199. Google Inc also unveiled its Nexus 7 tablet in June, starting at US$199 for an 8GB model and US$249 for a 16GB version.
Apple’s “new iPad” was launched in March, at a starting price of US$499 for a 16GB model.
Although the lower-priced tablet market is still young, Apple may consider jumping into that segment with the smaller “iPad mini” to maintain its shipments growth, Chou said.
However, launching a cheaper iPads will likely lower the margins of its tablet lines and lead to a change of supplier mix, Chou said.
Apple announced last Tuesday that it had sold 17 million iPads, including the older iPad 2 and the new iPad, in the second quarter of this year, an increase of 84 percent from a year ago. Total iPad sales reached 29 million units in the first half of the year.
However, there has been speculation recently that Apple may be cutting back on the production of iPad panels, said David Hsieh (謝勤益), vice president in charge of the Greater China market at US-based market researcher DisplaySearch.
“This would be a source of major concern for its fastest-growing product line, but it’s more likely a case of Apple and its suppliers trying to gain leverage on each other — something that is becoming increasingly common for Apple,” he said recently on his blog.
However, some industry sources have suggested that Apple is reducing its iPad panel and complete unit production, Hsieh said.
He said the reasons include increased inventory levels, especially panels, at China-based Foxconn Technology Group (富士康科技集團), the sole iPad assembler.
Although the new iPad is selling well, the ramp is not as steep as for the iPad 2, indicating that there could be some saturation leading Apple to control inventory, Hsieh said.
“If Apple really is reducing orders for the new iPad, panel makers will have to adjust their production strategies, and some capacity dedicated to iPad panel production will be released, increasing oversupply,” he said.
Furthermore, the new iPad uses a 9.7-inch Retina display, which is difficult to manufacture using existing TFT LCD processes due to the high resolution and strict quality requirements, he said.
Apple has therefore been adjusting its panel supplier mix to diversify production risk, Hsieh said.
Apple has likely found three qualified sources for the display used in the new iPad — Samsung Electronics Co, LG Display Co and Sharp Corp — but the majority of the new iPad displays might come from Samsung, market researcher IHS iSuppli said.