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Will Supply Problems Hurt an iPad Mini Launch?


Sources in Taiwan say production for an "iPad Mini" has run into difficulties.

MINYANVILLE ORIGINAL Yesterday, the Wall Street Journal reported that Apple's Asian component suppliers have begun mass producing "a new tablet computer smaller than the current [one]." Apple has not officially announced the "iPad Mini," but analysts seem confident that the reports from sources in Apple's supply chain in Taiwan are accurate.

These same sources have also mentioned that Apple is facing supply constraints due to difficulties in producing certain components for an iPad Mini, reminiscent of the problems caused by a shortage of in-cell displays for the iPhone 5 launch.

Barclays highlighted the iPad Mini production problems in a research note released on September 27. Analyst Kirk Yang stated that the iPad Mini assembler Pegatron (TPE:4938) "lacks the experience for tablet assembly, which has a long learning curve." According to Barclays, Apple likely initially tasked Pegatron with assembling 70% of the total iPad Mini production for this year, but this number has dropped to 30% with Foxconn (HKG:2038) picking up the slack.

He expects Hon Hai (TPE:2317), the parent company of Foxconn, to ship 6 million to 7 million iPad Minis and Pegatron to ship three million tablets in the fourth quarter. The Digitimes also reported this splitting of production between the two companies, saying Foxconn will likely produce over 50% of the first batch and Pegatron will assemble the remaining amount.

Yang predicts that Apple will launch the tablet this month and see no signs of a postponed shipment schedule.

Analyst Brian White of Topeka Capital Markets released a similar note today to investors saying that Apple's supply chain is having trouble producing the smaller tablet because of its complex design. White, like Yang, mentions lower-than-expected production yields. However, White disagrees with Yang's assessment of the shipment schedule.

White himself believed that Apple would have launched the smaller tablet in September along with the iPhone 5, contrary to the popular belief that Apple wanted to spread out two major product launches. The supply constraints have pushed back the launch of the iPad Mini four to six weeks in his view. Similar to Yang, he expects a launch to occur "over the next month," saying that "the supply chain feels the much anticipated iPad Mini is on track to reach acceptable volume levels for a launch over the next month."
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