Apple May Have IPad Shortages Amid Production Issues

The Apple iPad
A file photo of the Apple Inc. iPad in New York. Photographer: Daniel Acker/Bloomberg

Apple Inc., which delayed selling the iPad outside the U.S. because demand is outpacing supply, may be struggling to get enough of the touch screens used in the tablet computer, analysts said.

The display’s size could be a challenge to suppliers, who may be unable to make usable screens in the quantities Apple needs, said Andrew Rassweiler, an analyst at research firm ISuppli Corp. in El Segundo, California. The 9.7-inch (25-centimeter) screen, larger than that of the iPhone, is made by South Korea’s LG Display Co. and Samsung Electronics Co., and Japan’s Seiko Epson Corp., according to ISuppli.

“We understand that the yields on the display have been low and that they’re creating a production bottleneck,” Rassweiler said in an interview. “That they have been doing it for the iPhone for some time is great, but once you go to 9.7 inches, it is a much more complicated process.”

Any constraints might delay Chief Executive Officer Steve Jobs’s attempts to conquer the tablet market before rivals such as Hewlett-Packard Co. and Dell Inc. start selling competing devices. Jobs is betting on the iPad to create a new business at Apple between the iPhone and Macintosh computer.

Apple declined to comment on questions regarding iPad manufacturing, said spokeswoman Natalie Kerris. She reiterated the company’s April 14 comments that “demand is far higher than we predicted and will likely continue to exceed our supply over the next several weeks.”

International Delay

Chris Goodhart, a Samsung spokeswoman in San Jose, California, declined to comment. Anthony Moon, a spokesman for LG in Seoul, and representatives of Seiko didn’t respond to requests for comment.

Apple sold more than 500,000 iPads in the first week after its U.S. debut on April 3. Apple said it made the “difficult decision” to delay the international release of the iPad by a month because demand was greater than it predicted. That means the iPad -- a mobile gadget for surfing the Web, reading electronic books, playing music and watching videos -- won’t be available until the end of May in the U.K., Canada, Australia, France, Germany, Italy, Japan, Spain and Switzerland.

The iPad’s LED-backlit display is about 6 inches larger than the color screen used in Apple’s iPhone. For the iPad, Apple opted for a screen technology called IPS, or in-plane switching, that the company said provides “crisp, clear images and consistent color with an ultra-wide” viewing angle.

Apple doesn’t disclose which suppliers provide parts for the iPad or who manufactures it, though it has said most of its products -- including the iPhone, Mac and iPod media player -- are made by partners in China.

No Surprise?

“Scaling manufacturing of the iPad has been quite a challenge -- there are a number of key components that go into that device that have never before had to scale to mass-market production,” said Yair Reiner, an analyst at Oppenheimer & Co. in New York. “We shouldn’t be so surprised that some of those start to hit some glitches.”

Morgan Stanley also says the iPad overseas delay has to do with building up its manufacturing. The “biggest limitation” is producing enough touch-screen panels, though yields have improved, said Katy Huberty, an analyst in New York.

The London research firm Ovum expects Apple to ship 13 million iPads by the end of next year.

“The iPad is based on a number of high-end components, including its Apple-designed A4 processor and 9.7-inch LCD screen, which will take Apple’s manufacturing partners time to produce in significant volumes,” said Tim Renowden, an analyst for Ovum.

Priciest Component

Apple, based in Cupertino, California, fell 33 cents to $247.07 in Nasdaq Stock Market trading at 4 p.m. New York time. The shares have doubled in the past year.

A teardown analysis by ISuppli showed that the touch-sensitive, custom-manufactured glass screen is the iPad’s most expensive component. The display accounted for $95 of the $259.60 the firm estimated it costs Apple to build the device.

The screen’s special design makes it about twice as expensive as those used in netbook computers of similar size, according to Rassweiler.

Taiwan-based Wintek Corp. makes the glass overlay necessary to detect touches of users’ fingertips, and Broadcom Corp. and Texas Instruments Inc. provide chips used to help control the touch screen, ISuppli said.

Bill Blanning, a spokesman for Irvine, California-based Broadcom, didn’t return a call seeking comment. Kim Morgan at Dallas-based Texas Instruments declined to comment. Wintek representatives didn’t respond to requests for comment.

Previous Snags

Apple has run into manufacturing difficulties on some of its products before, including its MacBook notebooks and iMac desktops, said Shaw Wu, an analyst with Kaufman Bros. in San Francisco. The iPad screen is “expensive and difficult to produce,” and it’s not surprising that Apple might run into manufacturing snafus with the first iterations of a new product, he said.

“You don’t really know where your production snags are until they happen, so there’s a learning process that they’re going through right now,” Wu said. “They’ll be retooling and recalibrating their lines until they get it right.”