iPad Mini in supply chain gamble

Apple may have announced its latest product to its adoring followers, but analysts are wary that consumers may be waiting longer than usual to get hold of the iPad Mini due to supply concerns.

As was widely predicted, Apple announced a smaller iPad device, costing £269 in the UK, as well as a new iPad 4 and refreshes in its notebook and PC ranges.

However, with demand likely to be high for the new devices, particularly the cheaper Mini tablets, panel supplies are expected to be even more constrained than usual.

According to DisplaySearch, Apple has changed up its supply chain for the Mini, continuing to work with LG Display, which will supply to Apple’s Taiwanese manufacturing partner Foxconn, and adding a new supplier to its chain, AUO, which provides panels to Pegatron.

According to reports in the run up to the Mini, manufacturing will be split roughly equally between the two manufacturers, with AUO likely to take up to 60 percent of the production as it effectively takes the place of Samsung.

With the ongoing fight with Samsung over intellectual property, Apple started dissolving its relationship with the former ally, leaving the firm with limited options.  Samsung had previously been a reliable partner and Apple is now having to deal with an altered supply chain.

Analysts point out AUO has had yield problems with its 7.9 inch panels. These production problems are resulting in tightened supply to Pegatron which is tasked with putting the final touches to the devices. 

This means that in September, AUO shipped just over 100,000 units, a third of what Apple’s other supplier for the Mini, LG Display, managed in the same month.  

Tightened supply could continue for some time.  AUO’s production plan is to churn out 400,000 units in October, 800,000 in November, and reach the 1 million mark in December.  In contrast, LG Display will be shipping 1 million in October, 2.5 million in November, and 3 million the following month.

Apple will hope to shift a serious amount of the upcoming devices, but sales are still limited to what Apple and its supply chain can actually produce – and without Samsung this number is potentially lowered.

Reports in the Korea Times earlier this week show that the deteriorating relationship between the pair means that, in addition to not providing displays for the Mini, Samsung, already getting edged out of chip production, is likely to be given the elbow on all future display production.

Samsung had previously been the top supplier to Apple for LCDs used in its range of PC and mobile devices, shipping 15 million units in the first six months of the year.  However this figure is thought to have dropped to  3 million during the third quarter, with expectations that it will drop to 1.5 million in the fourth. 

Presumably others such as LG Display, Sharp and AUO will see increased orders to compensate, however, even Sharp has been having problems producing enough screens for the iPhone 5 in the run up to the Christmas period.

A company that intentionally puts the squeeze on supply to manufacture hype, Apple may find itself in a real quandary sooner than it would like.