iPhone 4: Demand Chases Supply

I know I'm pretty excited about the release of iPhone 4, and apparently so is everybody else: "Apple and AT&T had the best and worst of weeks, when the iPhone 4's first day of pre-order availability resulted in sales of 600,000 units and the total meltdown of both companies' ordering systems." Despite many peoples' resentment of the AT&T monopoly over iPhones, Apple's product credibility holds up. Demand is obviously there.

But what about supply? One of the best new features of the iPhone 4 is the Retina Display screen, which allows for a fantastic picture at any angle. Problem is, LG Display, the supplier of the screens, isn't producing them fast enough. "According to Ashok Kumar, managing director and senior technology analyst at Rodman & Renshaw, supply issues might become a problem for the new iPhone over the coming months. 'Low yields on the IPS LCD panel from LG Display have dramatically impacted the production volumes for iPhone 4,' Kumar wrote in his research note," according to this article. One small piece of the supply chain, then, will potentially cause a huge bottleneck in production through September, according to Kumar. Another worry is that demand for the legacy 3GS model will drop before production can ramp up for the iPhone 4.

Furthermore, the white iPhone 4 may remain as illusive as its ghostly hue, and Apple is remaining mum on an explanation. "The unexpected disappearance of the new white iPhone 4 may be appropriate, as it represents a trend in which white-hued products have been gradually disappearing from Apple's product lines for a decade," according to this post. People apparently miss the sleek, simple white of Apple's former product line, and the new white iPhone 4 will be seen as something of a status symbol...if it's actually released. "Considering the growing misinformation regarding the white iPhone 4 delay coming both from Apple's iPhone partners and the imaginations of iPhone enthusiasts, Apple would do well to make an official statement on the status of the white iPhone 4 prior to launch day, as confusion currently reigns supreme in the absence of verifiable information," says the article.

So how can AT&T and Apple deal with both variability and huge demand in the face of a partially unprepared supply base given that one kink in the supply chain can lead to lost orders, delayed revenue and unhappy customers? Perhaps it's time to consider more of a dual or multi-sourcing strategy for key components, going against the highly rationalized supply chain grain that has defined much of Apple's iPhone sourcing strategy up until now, at least for key components. Or, perhaps Apple might consider creating additional incentives -- or punitive measures -- to encourage strategic suppliers to invest in additional (or alternative site) R&D, raw material and production capacity to ensure that demand is met, even during spiky launch periods.

Until they figure out this strategy or wait for current supply to catch up with demand, I suppose I'll just eagerly wait for my iPhone 4 to arrive -- someday.

Sheena Moore (with Jason Busch)

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