iPad 2 partner Foxconn experiencing component and labor shortages

Despite a blow away quarter, Apple's iPad sales last quarter came in slightly below analyst expectations. Of course, the problem had nothing to do with consumers shying away from Apple's next-gen tablet, but was rather the result of Apple being unable to meet immense demand. And not it looks like history might repeat itself this quarter

Despite a blow away quarter, Apple's iPad sales last quarter came in slightly below analyst expectations. Of course, the problem had nothing to do with consumers shying away from Apple's next-gen tablet, but was rather the result of Apple being unable to meet immense demand.

Apple COO Tim Cook had to explain that Apple literally sold each and every iPad it manufactured last quarter and that it was doing its best to improve supply to better keep up with demand. It's since been reported that the cause of limited iPad 2 supply was rooted, in part, in faulty audio parts, a problem that's since been remedied.

But with the Japan disasters still affecting component availability, Apple may still be struggling to meet iPad 2 demand this quarter.

DigiTimes is reporting that Apple's iPad manufacturing partner Foxconn is experiencing shortages in terms of component parts and in labor. Apple of course has reportedly paid premium prices for component parts in order to ensure a steady flow of parts for its products, but apparently there's only so much they can purchase before supply is clean out. Also, there's not much to be done if there aren't enough workers to help manufacture the products, though Foxconn is reportedly working on fixing that as soon as possible.

In any event, the report relays that Apple, as a result, may not be able to ship as many iPad 2s this quarter as they were hoping. More specifically, Apple wants to produce around 2.5-3 million iPad units each month, resulting in approximately 35-40 million units in 2011.

As for Foxconn's plants in Chengdu, which are used mainly for iPad 2 manufacturing, although the company planned 52 production lines at the plants for manufacturing iPad with annual capacity already surpassing 40 million units, as Japan's earthquake seriously impacted component supplies such as power amplifiers and memory to the plants, while the plants' labor is also falling short, supplies of iPad 2 are still mainly from its plants in Shenzhen. As a result, Foxconn may have difficulty in satisfying Apple's demand for supplying an average of 2.5-3 million units of iPad 2 each month in the second quarter, the sources noted.

At the end of the day, Apple remains in the driver's seat. Struggling to meet soaring demand is a good problem to have, all things considered. Moreover, if manufacturers are struggling to shore up component parts for Apple products, other hardware companies must be facing an even tougher time. Moreover, iPad competitors have for the most part been complete flops thus far. The Motorola Xoom has been a raging disappointment in terms of units sold and the RIM Playbook has largely been pegged as a beta tablet rushed to the market too soon.

Going forward, Apple may experience some turbulence in its efforts to match up iPad 2 demand with supply, but the long term prospects still look rosy as ever.

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Copyright © 2011 IDG Communications, Inc.

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