iPad 2 Inventory Management In Preparation For iPad 3?

DIGITIMES:

Sales of iPads at the end market totaled 11.12 million units in the third quarter of 2011, according to data released by Apple. However, inventories of parts and components prepared by the makers in the supply chain for the production of iPad 2 in the quarter are sufficient for the production of 15-16 million iPads, leaving a stockpile of 4-5 million units of iPad 2 in the supply chain, the sources noted.

Apple has reportedly reduced orders for 9.7-inch 1024×768 LCDs from September to October:

  • LG Display: 3M → 2.5M
  • Samsung: 2M → 2M
  • CMI: 700K → 350K

Let’s look at iPad sales by calendar year quarters:

  • Q2’10: 3.27M
  • Q3’10: 4.19M
  • Q4’10: 7.33M
  • Q1’11: 4.69M
  • Q2’11: 9.25M
  • Q3’11: 11.12M

Look at the jump in iPad sales in Q4’10. If the brief sales history is any indication we’re looking at 18M-20M iPad sales in Q4’11. All current component inventories in the supply chain should be used up for the manufacture of iPads in Q4’11. And it’s good to wind down component production because Q1’11 wasn’t so good and most likely neither will Q1’12. But there’s an additional reason.

The original iPad was introduced January 27, 2010 and became available three months later in April. The iPad 2 was introduced March 2, 2011 and made available nine days later. I expect Apple to unveil an iPad 3 in March 2012.

The iPad 3, which I think might be called iPad Pro, is expected to sport a Retina Display with a 2048×1536 pixel format. I’ve heard these 263-ppi IPS-equivalent displays are difficult to manufacture in large quantities. DIGITIMES reports that Samsung and Sharp are already shipping these displays in October. These are probably the initial small-quantity batch for EVT (Engineering Verification Testing) or DVT (Design Verification Testing) units.

With a late-Q1’12 launch of the iPad 3 in addition to having enough components to meet expected demand for the iPad 2 in Q4’11 the reported reduction of production levels of the current 9.7-inch LCD is Apple conducting smart supply chain management.

Update: DIGITIMES is reporting one million 9.7-inch Retina Displays shipped in October:

Samsung Electronics, LG Display and Sharp reportedly shipped a total of one million units of high-resolution flat panels for next-generation iPads to Apple in October and will ramp up shipments to two million units in November, according to industry sources.

According to my sources there have been significant challenges manufacturing these displays defect-free in high volume. And this was just a couple of weeks ago.