Supplies of Apple Inc.’s second-generation iPad mini are expected to fall well short of demand in the fourth quarter due to limited production of the tablet’s new Retina Display, according to IHS Inc. (NYSE: IHS).
Based on current supply data, shipments of the new iPad mini with Retina Display will fall below 4 million units and potentially amount to less than 3 million units in the fourth quarter. This would represent as little as one-third of the 8.9 million unit volume of the first-generation iPad mini shipments during the final three months of 2012, the first quarter when that product was sold. Actual demand for the original mini was well above the 8.9 million figure, leaving Apple with a huge backlog of orders for the mini at the start of 2013. With demand for the new mini in the fourth quarter expected to equal or exceed the nearly 9 million units of its predecessor model, supply and demand will be severely out of balance.
The attached figure presents historical shipments by quarter of the iPad line.
"Apple is being rather vague about the exact availability date of the new iPad mini with Retina Display, simply stating that the product would ship later in November,” noted Rhoda Alexander, director of tablet research at IHS. “The company has good reason to be coy about the exact release date, given that supply of the new mini is going to be ridiculously tight in the fourth quarter. The heart of the problem is supply constraints on the new Retina panel.”
Production is still ramping up on the 7.9-inch Retina panel with low yield rates limiting production, according to IHS display research. With most of the production occurring late in the quarter and the challenges inherent in the new system design, iPad manufacturing is expected to lag well behind panel production in the fourth quarter.
Supply will improve substantially in the first quarter of 2014, but with Chinese New Year falling at the end of January, supply difficulties on the new mini could linger into February or March of 2014.
Curiouser and curiouser
“With supply of the new Retina mini estimated to come in at one-third or less of Apple’s mini unit shipments in the fourth quarter of 2012, it’s curious that Apple elected to include the product at the same time as the iPad Air,” Alexander said. “The iPad Air is an impressive product in its own right. Faster, lighter, and substantially thinner than earlier generations, the iPad Air provides a long-awaited design refresh of the 9.7-inch iPad. Apple could have split the product launches, as they did in 2012, and introduced the mini in the first quarter of 2014.”
The iPad Air incorporates the design elegance of the original mini, delivering a device that is 0.4 pounds lighter and 20 percent thinner than its predecessor. Apple also improved connectivity, incorporating MIMO inside to boost Wi-Fi performance, the new A7 processor chip, and expanded LTE bands to support more carriers around the globe.
The benefits of staggering
The single fourth-quarter 2013 launch, in contrast to the two-pronged launch strategy of 2012, has created some serious growth challenges for Apple in 2013.
Lacking an iPad launch in March, Apple’s tablet unit shipments declined in the second quarter of 2013 compared to one year earlier—the first time the company suffered such a decrease for its tablet products. That timing shift also robbed Apple of the momentum that it normally had in what is historically a slow consumer quarter and opened the door to competitors such as Samsung, which launched its 8-inch Galaxy Note during the second quarter.
A launch now of the iPad Air—perhaps coupled with the a separate launch of the iPad mini with Retina Display in February or March of 2014, when supply will be more assured—might have set the stage for a return to the two-pronged launch strategy that served Apple so well in 2012.
In addition to potentially providing an extra boost to iPad shipments in 2014, the two-pronged approach could have also allowed Apple to own the product news cycle for much of the year, which provides copious free advertising for the Apple brand.
The 2,048 by 1,536 resolution display on the iPad mini with Retina Display—in the same pixel format as that of the iPad Air—costs substantially more than the 1,024 by 768 version in the original mini.
The iPad mini with Retina Display costs $399 for the 16GB model.
By itself, this high resolution is insufficient to justify a selling price for the new mini that is $170 more the than that of the new Google Nexus 7 tablet and the Kindle Fire HDX 7 from Amazon, each priced at $229 for similar pixel density. It is the combination of the Retina Display panel with the new iPad mini’s overall product design—including 64-bit architecture, durability, ease of operating system upgrades and richness of the Apple ecosystem—that makes the math work. That said, the price point is likely to be a sticking point for value-centric consumers weighing the lure of Apple against the ever-expanding array of Android alternatives.
Apple has dropped the price point of the original mini to $299 to reach some of those users, but that price point still sits well above the market average for 7-inch products with similar performance.
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