iPad 2 released abroad despite struggling to meet US demand
iPad 2: While the disaster in Japan may cause delays in production, the iPad 2 was rolled out overseas, Friday to much fanfare. Will Apple be able to meet the demand?
WELLINGTON/SYDNEY — Hundreds of customers formed long lines outside Apple stores on Friday for the international launch of the iPad 2, which has flown off the shelves in the United States and left the company struggling to meet demand.
Analysts forecast some 1 million devices may have been sold in the first weekend of the U.S. launch, but many warn that it's not clear how supply constraints will affect availability after an earthquake and tsunami damaged Japan's tech industry.
The iPad 2, a thinner and faster version that features two cameras for video chat, was introduced in the United States on March 11. But some would-be buyers have expressed frustration at how difficult it has been to secure one of the wildly popular tablet computers, sparking speculation Apple misjudged demand.
The international launch kicked off in New Zealand, then Australia, and will be rolled out in other countries including France, Britain, Denmark, Germany, Italy, Netherlands, Spain, Canada and Mexico.
"Fantastic, my sister will love it," said Alex Lee, a Canadian backpacker clutching an iPad 2. He was first in line after queuing for two nights outside the Apple store in Sydney's central business district.
"If it wasn't for the iPad, I wouldn't be in Australia right now," said Lee, who had already bought an iPad 2 in the United States. "It's like a habit. I've also lined up on Regent Street in London for the iPhone."
Apple Chief Executive Steve Jobs said on Tuesday the company was "working hard to build enough iPads for everyone" as the company struggled to meet U.S. demand.
Fiona Martin, a spokeswoman for Apple in Australia, declined to comment on whether there was enough stock to meet demand but tried to allay supply concerns.
"We've got plenty down there for all those folk that are in the queue," she said.
The first iPad, which went on sale a year ago, sold 500,000 units in the first week and crossed the 1 million unit mark in 28 days. Nearly 15 million iPads were sold in nine months of 2010, two or three times as many as analysts had predicted.
Analysts expect the company to sell 30 million or more this year, generating close to $20 billion in sales, even as other companies launch their own devices.
Apple staff in Sydney handed out sandwiches to those in the queue, while in Perth staff handed out water, ice cream and sun block against temperature expected to reach 36 Celsius.
However, in Helsinki, where the iPad 2 goes on sale in a few hours time, snow and temperatures around minus 3 Celsius appeared to be putting potential buyers off from forming queues just yet.
Myles Jihme, a student from Malaysia, waiting outside the Apple store in Sydney said he intended to buy two iPads, the maximum allowed by Apple, and would auction one for charity.
"All the profits from the sale will go to Japan's disaster fund," he said.
JAPAN SUPPLY WOES
After opening the tablet market with its iPad 1, Apple faces increased competition as rivals scramble to try to catch up.
Analysts are also concerned that Apple will face shortages of key components for the iPad 2 because of the earthquake and tsunami that struck Japan two weeks ago.
The country is at the heart of several industries and the impact has already been felt in the supply chains of sectors including autos, telecoms and electronics.
Several key components in the new version of the iPad 2 come from Japan, including the battery and the flash memory used to store music and video on the device, according to IT research house iSuppli.
Apple delayed sales of the iPad 2 in Japan, but has said that had nothing to do with any component shortages.
Analysts say it's too early to gauge the extent of component supply shortages, while the wait time on delivery of online orders has shortened to 3-4 weeks in recent days from as high as 6-7 weeks, suggesting any shortages have not reached critical levels.
In Taiwan, the CFO of TPK Holdings, a major supplier of touch screens to companies that include Apple, said it has had no problems with supplies because it has many secondary sources outside of Japan.
Hon Hai Precision Industry Co, a contract manufacturer and subsidiary of Foxconn that is heavily reliant on Apple, said it does not expect near-term supply problems.
Most of the Japanese factories that are thought to supply Apple with parts are situated well away from the quake-hit area, but supply distribution is expected to be hit by nationwide fuel shortages.
Apple's clout in the supply chain means investors remain confident - for now - that it enjoys priority and can secure critical components ahead of competing manufacturers.
Still, Apple is unlikely to avoid a hit from the disruption in Japan, analysts said.
"We think the disruption especially for chemical materials could continue throughout Q2 and when the components become absent, it's inevitable that Apple would be affected," said Calvin Huang, an analyst at Daiwa in Hong Kong.
"Then we will see a situation that customers will have to wait for months for an iPad to arrive after placing an order."