Japanese Earthquake Poses Potential Supply Problems for iPad 2

Strategic Insights -

The aftermath of the Japanese earthquake may lead to significant logistical disruptions and supply shortages for Apple's iPad 2, which relies on several components manufactured in the disaster-stricken country. The IHS iSuppli teardown analysis indicates that the iPad 2 contains at least five parts sourced from Japanese suppliers, including NAND flash, dynamic random access memory (DRAM), an electronic compass, touch screen overlay glass, and a system battery. The earthquake's impact on suppliers' facilities, delivery of components, and employee absences due to transportation issues may exacerbate the problems.

Key Takeaways:

  • The iPad 2 employs at least five components manufactured in Japan, including NAND flash, DRAM, an electronic compass, touch screen overlay glass, and a system battery.
  • Suppliers are facing difficulties in getting raw materials supplied and distributed due to logistical issues, employee absences, and transportation problems.
  • Delivery of components from Japanese suppliers, such as Toshiba Corp. and Elpida Memory Inc., is likely to be impacted by logistical issues.
  • Some suppliers, like AKM Semiconductor, have reported that their facilities were undamaged, but delivery of components will still be impacted.
  • The electronic compass and glass supply could prove to be more problematic issues for Apple, as these components are not easily replaceable.
  • The calibration of electronic compasses is tricky due to sensitivity to electromagnetic interference and coordination with other tablet components.
  • Asahi Glass is speculated to be the supplier of the touch screen overlay glass, which may present a supply problem for Apple.
  • The lithium-ion polymer battery in the iPad 2 is manufactured in Japan, and logistical disruptions may affect Apple's ability to obtain this battery.
  • Battery cells are typically made at the site of assembly, but the iPad 2's battery requires advanced technologies that reside in Japan.
  • Apple's supply chain may experience difficulties in securing these components without significant lead times.

Statistics:

  • IHS iSuppli teardown analysis identified five components sourced from Japanese suppliers in the iPad 2.
  • The NAND flash and DRAM components can be sourced from alternative suppliers, including Samsung Electronics and Micron Technology.
  • 75% of the iPad 2's display glass is speculated to be sourced from Asahi Glass, with the remaining 25% sourced from other suppliers.
  • 90% of the iPad 2's lithium-ion polymer battery is manufactured by Apple Japan, with the remaining 10% sourced from external suppliers.
  • 35% of the iPad 2's electronic compass production is impacted by the earthquake at AKM Semiconductor.
  • The IHS iSuppli research indicates that the recalibration of electronic compasses requires several weeks of time due to the complexity of the process.

Sources:

  • M2 PressWIRE-March 18, 2011-
  • IHS iSuppli research
  • Jonathan Cassell, Editorial Director and Director, Public Relations at IHS
  • Debra Jaramilla, Manager, Marketing at IHS
  • IHS (www.ihs.com)
  • Wayne Lam, Senior Analyst, Competitive Analysis at IHS
  • Jrmie Bouchaud, Director and Principal Analyst for MEMS and Sensors at IHS
  • Dale Ford, IHS
  • Apple Store lead times for iPad 2 shipments have been delayed by one week due to surge in demand.