Analysts Dispute Supply Chain Conclusions of iPad Production Cuts

Earlier today, a report from JPMorgan analysts made headlines for its claim that Apple has slashed its fourth quarter iPad production plans by 25%, sparking speculation and rumors that Apple may be planning a price cut amid weakening demand.

ipad2 hero
The Wall Street Journal notes, however, that several analysts have already spoken out against the conclusion, arguing that a single supply chain data point is insufficient to warrant such drastic production cut predictions. From Piper Jaffray analyst Gene Munster:

We also note that previous calls based on sell-in or supply chain data have, for the most part, proven to have very little correlation with Apple’s results vs. consensus dating back to early iPod shipments (2003). We believe Apple purposely maintains enough suppliers and manufacturing partners to make any one supply-side data point inconclusive.

Analysts also note that Apple appears to have actually accelerated production and bumped up third quarter orders to stockpile iPads heading into the holiday shopping season. Sources also indicate that Apple is likely to begin production of the iPad 3 at the end of the fourth quarter or early in 2012 and may be accelerating production now in order to ease that transition.

Apple struggled with the transition from iPad to iPad 2 production earlier this year, with weak sales coming in the first quarter of this year as Apple scaled down production of the original iPad and was unable to meet heavy initial demand for the iPad 2. From Susquehanna analyst Chris Caso:

We believe chatter regarding iPad production cuts are misleading – we have seen pull-ins, not cuts. We have noted recent comments by competitors discussing iPad production cuts for 4Q. Our recently published AAPL supply-chain checks noted a sequential decline in 4Q iPad builds from 17 mln-19 mln units in 3Q to 11 mln-13 mln units in 4Q. However, the 4Q sequential decline was accompanied by an increase in 3Q builds, leading us to conclude that production was likely pulled-in from 4Q to 3Q.

Some have suggested that the fourth quarter production cuts may be due to Apple shifting some production to Brazil by the end of the year, although most of Apple's Asian component suppliers would be expected to be serving that production channel in addition to the existing Chinese channel.

Apple's stock dropped as much 3% earlier today as the initial report circulated, but has since rebounded and is currently down only about 1.25%.

Related Roundup: iPad
Buyer's Guide: iPad (Caution)
Related Forum: iPad

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Top Rated Comments

aristokrat Avatar
166 months ago
Called it. As I said in the last thread, this was professional and bald-faced market manipulation. What all the other analysts are saying about one data point being too little to base a predication on, that's exactly the point: this analyst can back up his ridiculous claims based on "real" evidence, right after he dumped some stock and then picked it up again 3% cheaper. The SEC should pay this guy a visit.
Score: 7 Votes (Like | Disagree)
Mattsasa Avatar
166 months ago
in other news: Apple is wiping iCloud data as we speak!

and invitations should go out tomorrow, and stock will go back up
Score: 5 Votes (Like | Disagree)
rdowns Avatar
166 months ago
These analysts are no different in their predictions than the kiddies in the iPhone forum. Wondering why MR and others publish obviously market manipulation stories.
Score: 4 Votes (Like | Disagree)
qtx43 Avatar
166 months ago
This is the Windows 8 effect. You think it's a coincidence that demand for the iPad 2 has dropped a staggering 25 percent after Microsoft released the Windows 8 preview?

nope, my father in law who can barely get to google by himself on his laptop is downloading it as i type this to install on his laptop
Your computer illiterate relative is going to run a developer preview of an OS that won't be out for probably another year? Is this a joke? Good luck, you'll be spending even more time helping him get any actual work done.
Score: 3 Votes (Like | Disagree)
paul4339 Avatar
166 months ago
from WSJ Marketbeat:

... Apple shares were briefly lower than $392 in stark terror over this note, which J.P. Morgan is hustling to back away from as quickly as possible.

CNBC reports that J.P. Morgan is telling traders to tell clients that it thinks iPad sales are just fine. Apple shares have scrambled back to nearly the $400 mark on that CNBC report.
http://blogs.wsj.com/marketbeat/2011/09/26/apple-shares-briefly-fall-on-fear-of-unthinkable-flagging-in-ipad-demand/

drive down the price, back up the truck, re-tract statement, sell back your own clients at a profit. repeat.


.
Score: 3 Votes (Like | Disagree)
Laird Knox Avatar
166 months ago
This is the Windows 8 effect. You think it's a coincidence that demand for the iPad 2 has dropped a staggering 25 percent after Microsoft released the Windows 8 preview?

You think that many iPad purchasers have even heard of Windows 8?
Score: 3 Votes (Like | Disagree)