Apple iPad in big demand, can Apple keep up?

Apple reported in its last financial results that as of June 26, 2010 it has shipped 3.27 million iPads.  This is the first quarter of availability for the iPad.  It is shipping at the rate of about 1 million units per month.  However, keep in mind that there was a large amount of pre-orders prior to its April launch.

The question is can Apple ramp up production to meet demand?  Apple’s Steve Jobs has stated since its launch that demand for iPad has been stronger than expected.  Apple has been rolling out iPad to markets outside the US in select countries at different times rather than an all out world wide blitz.  On May 28 Apple made iPad available in Australia, Canada, France, Germany, Italy, Japan, Spain, Switzerland and the UK.  On July 23 Apple extended this to Austria, Belgium, Hong Kong, Ireland, Luxembourg, Mexico, Netherlands, New Zealand and Singapore.

This steady roll out may help Apple manage its supply issues.  Recently, the supplier of the iPad’s display, LG said that it was unable to keep up with demand.  Apple has signed on Samsung as a second manufacturer.  Flash memory is an important component for iPad.  There has been strong demand for Flash for many devices.  Apple’s iPad has to compete for this supply.

There are several iPad “killers” from major OEMs waiting in the wings.  These are likely to launch in 4Q 2010.  It is uncertain how well these products will do against the iPad.  Presumably, there should be some significant sales since they are from major OEMs such as HP and Dell.

It is interesting to note that even with more international markets being added each month, iPad ramp has not increased significantly, but it has kept a steady pace.  Semico assumes that the run rate will increase slightly during 2010.  The 4Q 2010 should be strong due to holiday sales.  Semico is increasing its forecast for iPads and tablet PCs overall.  By the end of 2010 iPad shipments could be in the range of 10 to 11 million units and represent about 90% of the tablet PC market.

Tony Massimini
Chief of Technology
tonym@semico.com