HomePod Supplies Limited at Launch, but Foxconn Coming on Board in 2018 to Increase Production

Inventec Appliances has been a rumored supplier for Apple's HomePod smart speaker since before the device was announced at WWDC in June, and now the manufacturer has indicated that supplies for HomePod might be limited at launch, in line with most Apple product launches (via Nikkei).

The news came from Inventec Appliances president David Ho during a press conference today. Although his comments never specifically mentioned "HomePod," the estimated time frame given for the release of the product -- late in 2017 -- and its description as a high-profile "smart home device," suggest it to be Apple's upcoming speaker. At WWDC, Apple confirmed that the HomePod would launch sometime in December.

HomePod on shelf
Now, Ho has stated that the HomePod's contribution to the company's revenue for this year will be "fairly limited" -- which is expected given the device is launching so late in the year -- with optimistic improvements to profit gained from HomePod sales predicted for early 2018. One analyst speculated that the number of HomePod units shipped in December 2017 will be around 500,000.

“We will finally ship the smart home device this year, but its contribution will be fairly limited and hopefully that will improve next year,” Inventec Appliances President David Ho told analysts and reporters during an earnings conference.

“Inventec Appliances will likely only ship some 500,000 units of HomePod this year, and the device’s contribution to the group’s revenue will be less than 1%,” said Arthur Liao, an analyst at Taipei-based Fubon Securities.

In 2018, Apple will look to open up HomePod manufacturing to more than just Inventec Appliances, according to one of Nikkei's sources, who stated that Apple is planning to add Foxconn into the HomePod supply chain next year. This will result in Inventec Appliances and Foxconn receiving a "split" of HomePod orders and boosting production for the smart home speaker, following the limited initial launch.

Inventec Appliance's total smart home and connected devices shipments are expected to grow to between 70 and 75 million units by the end of 2017, but company officials didn't specifically break down the numbers related to the Apple products it makes.

In addition to HomePod, Inventec Appliances also manufactures Apple's AirPods, which have been particularly difficult for many users to purchase since the wireless earphones launched last December. Earlier in August, the estimated shipping date for AirPods finally lowered to four weeks from six weeks, which had been the shipping estimate for the previous eight months.

Top Rated Comments

TurboPGT! Avatar
65 months ago
A "news worthy" article would be: Apple Product Launching Without Constrained Supply.
Score: 14 Votes (Like | Disagree)
Nunyabinez Avatar
65 months ago
The ignorance of internet armchair CEOs is astounding.

When establishing a supply chain, you have to optimize around what the expected average consumption will be for the foreseeable future.

Do you guys really think that there are dozens of companies that could tool up to produce a product for Apple for a short time?

And if it was you, how would you feel about this request? "Hey we need you to setup a factory to produce this product, but just for the first three weeks, then we won't need you anymore. You don't mind investing in equipment and training for just a couple of weeks worth of production do you?"

Apple figures out what they think the on-going rate will be and then builds up an initial supply to try to meet the giant wave that happens at launch. They could meet that demand by delaying the launch for several months while they store up units in warehouses.

I bet you guys would prefer that they delay the launch a couple of months so you could get yours on launch day. Oh wait, isn't that the same as launching when they have at least some supply and then filling as quick as they can? Plus they don't have all that money tied up in inventory sitting in boxes doing nothing.

Apple is not bad at supply chain, they are excellent. Macrumors posters are bad at understanding operations management principles.
Score: 13 Votes (Like | Disagree)
macpanzer Avatar
65 months ago
Limited at launch. Where have we heard that before... oh, right, with every Apple product released in the last few years. And the head of the company is supposed to be a supply chain genius.

Sarcasm aside, I really don't get how can they not manage anymore.
Score: 7 Votes (Like | Disagree)
Madmic23 Avatar
65 months ago
I'm pretty sure "limited supply at launch" is code for "Make you you preorder so we can say we sold out in the first day."

Nothing makes people want something more than being told it's rare and hard to find.
Score: 5 Votes (Like | Disagree)
ApfelKuchen Avatar
65 months ago
What even *is* this Home Pod? Do you need two of these, for stereo? Or do they come in pairs?
https://www.apple.com/homepod/

They'll be sold as single units. You won't need two for a stereo effect - each unit has 7 directional tweeters to steer sound around the room. If you add a second unit to a room, the pair is supposed to generate an even better stereo effect.

Siri/Smart Home is a big part of this, bigger than Apple is stating currently for marketing purposes (which is focusing on music and audio quality as the primary distinguishing characteristic between this and Amazon Echo). Ultimately, Amazon can also bring out a higher-priced, "audiophile" Echo, so I'd expect Apple's marketing points to change over time, with the competition.

I know I'd only buy one to start. If I buy a second, it'd likely be to extend Siri to a second room, rather than add stereo to a single room. Since they're wireless, a unit from a bedroom might be temporarily moved to the living room for the sake of a party. Since Siri's ability to hear is part of the effectiveness of the system, I suspect that in a large room the units would provide better service by being placed at opposite ends of the room, much farther away than is typical for good stereo separation. The effect in that case might be closer to surround sound than stereo.

------
Back to the whole 'limited quantities' thing. Anybody can produce a large purchase order in anticipation of sales, and if necessary build (or in Apple's case, finance) the manufacturing capability to deliver huge quantities on Day One. It can be a boom/bust strategy, as book publishers can tell you. If the potential blockbuster fails to delight readers, you'll soon see the book on the remainders table, marked down to $5 or less. As you know, Apple's not big on close-outs.

Apple does not place huge bets on new products. It's one of the reasons they have $260 billion in cash and marketable securities, and that the gross profit margin on most items is around 38% - if you over-produce, profit margin is diluted, cash reserves evaporate, and excess inventory weighs down the balance sheet.

Apple's is a conservative, long-term strategy. They're not focused on artificially boosting quarterly earnings by front-loading sales, exhausting all pent-up demand within the first few days in hopes that the word-of-mouth will be good enough to get more people into the store. They'd much rather gauge word-of-mouth following product release, and ramp up production if the product is warmly received. They're justifiably confident that the vast majority of customers who want Apple's latest and greatest will wait, rather than settle on another company's product. Sales deferred is still money in the bank.

Apple management has long been criticized for not following conventional business wisdom. Steve Jobs received his fair share over the years, and his unconventional approach is one reason there is a Cult of Steve. Tim Cook is following Apple's well-proven playbook. At least to my eye, he's doing a great job of executing.
Score: 4 Votes (Like | Disagree)
TurboPGT! Avatar
65 months ago
Why do Apple suck so bad at supply? Like...I don't get it. They're running out of excuses with the cash pile they're sitting on. Other companies seem to manage just fine with supply.
Who?

No one else does what Apple does.
Score: 3 Votes (Like | Disagree)

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