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Apple’s New iPad Still Has Supply Constraints

Source: New iPad/ Apple

Due to overwhelming demand of the new iPad across the world, Apple is still struggling to ramp up their supply. That’s why customers who are hoping to have their own tablet may need to wait longer than usual.

During their conference call last Tuesday, Apple announced that 11.8 million new iPads were sold during their second fiscal quarter. Although it missed analysts’ estimate of 13 million units, it still represented a 151% increase in sales.

Popularity-based Supply Constraints

Following the release of Apple’s new iPad last March 16, the company was able to sold 3 million units during its first week of availability. This is considered as their fastest tablet roll out to date. However, it popularity put a strain on their supply.

The demand for the latest tablet remains strong, but its production has reportedly been limited by supply of Retina Displays. Although Samsung is the primary supplier of high-resolution touchscreens for Apple, they’re having a difficult time keeping up with the demand.

Regardless, Sterne Agee analyst Shaw Wu believes that the situation will improve in the coming quarter, as new production lines and suppliers are added. In fact, it was rumored that LG Displays and Sharp are starting to ship Retina Displays in small volume.

Sound Labor Practices: Another Supply Constraint Factor

Another possible reason for product constraints is the fact that Foxconn is now complying with more sound labor practices. Last month, it was discovered by the Fair Labor Association that the manufacturing firm committed a number of violations. This includes excess in working hours. As a result, the factory reduced its working hours to the legal limit of 49 hours per week. The monthly overtime also decreased from 80 to 36 hours.

Ironically, Foxconn employees would want to work longer shift in order to acquire compensation that can meet their basic needs. Thus, the manufacturing firm decided to work with FLA to create a better compensation package to offset the losses that workers would face due to decreased working hours.

The new iPad vs. cheaper iPad 2

Unfortunately, Apple didn’t reveal any comparative demand between the new iPad and iPad 2, which is made more affordable following the latest tablet’s release. That’s because CFO Peter Oppenheimer find that the mix of these devices is still uncertain.

Nevertheless, the demand for the 16 GB model of iPad 2 and new iPad remains strong. To date, Apple has sold more than 67 million units of iPad. Cook put this numbers to perspective:

“It took us 24 years to sell that many Macs, five years for that many iPods and three years for iPhones, and we’re extremely happy with the trajectory on all those products. I think the iPad, it’s a profound product, the breadth of it is incredible, the appeal of it is universal. I could not be happier with being in the market.”

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