Apple Speeds Up iPad Shipping Times

Apple has increased its production capabilities, with its popular iPad tablet now being shipped to customers within 24 hours.

That narrowed ship-time extends to both the WiFi-only and 3G-enabled versions of the tablet, which presents a challenge to both e-readers such as the Amazon Kindle and lower end notebooks. Previously, Apple’s online store had reported days’ or even weeks’ worth of delays for shipments.

Production Issues

For the third quarter of fiscal 2010, Apple reported sales of 3.27 million iPads. “We’re increasing capacity as quickly as we can,” Tim Cook, Apple’s COO, told analysts and media during a 20 July earnings call. However, he offered no timeframe for when capacity would begin to keep pace with device orders, which had settled into a sell-through rate of roughly 1 million units per month.

Demand for the iPad also squeezed Apple’s suppliers.

“We can’t meet it all,” Kwon Young-soo, CEO of LG Display, told reporters from Reuters and other media outlets 22 July. “Apple may have to delay launches of the iPad for some countries due to tight component supplies and strong demand. We are considering increasing production lines for iPad products, but overall supply is likely to remain tight until early next year.”

The iPad and other devices could lead Apple to spend $16.2 billion (£10.4 billion) on OEM semiconductors in 2011, according to estimates from research firm iSuppli, enough to rank it second behind Hewlett-Packard at $17.1 billion (£11 billion). The firm estimated Apple’s 2010 semiconductor spend at $12.4 billion (£8 billion), meaning the company will need to increase spending by 30.4 percent to reach that 2011 target.

The Competition

Other manufacturers are moving to carve off their own piece of the still-nascent consumer-tablet market. Samsung has offered quick glimpses of its upcoming Galaxy Tab tablet PC, Hewlett-Packard is developing a tablet that runs its newly acquired Palm webOS, and Dell has the 5-inch Streak.

However, some analysts think those companies have a decidedly uphill battle ahead of them.

“Apple’s vertical integration with software, online services, apps and design give it unparalleled advantages in time-to-market and ease-of-use for customers,” Ben Reitzes, an analyst with Barclays Capital, wrote in a 7 July research note. “We believe HP must demonstrate to investors that its Palm deal gives them exposure – and that it can use its distribution and link with printers to help gain a foothold. We believe the tablet market presents challenges for Dell.”

Reitzes estimated that Apple will sell 20 million iPads in 2011.

Reports from other analysts suggest the tablet market will increase exponentially, perhaps cannibalizing part of the notebook market in the process. Research firm IDC estimates that worldwide media tablet shipments could total 46 million units by 2014, with analyst Susan Kevorkian suggesting that “consumer demand for media tablets [will] be strongly driven by the number and variety of compatible third-party apps for content and devices.”