Apple Can't Keep Up With iPad Demand

Apple sold almost 5 million iPads around the world last quarter. But it still couldn't make them fast enough to meet demand.

Steve Jobs introducing iPad 2

Apple sold almost 5 million iPads during its March quarter—and it still couldn’t keep up with the demand, company executives said during a quarterly earnings call on Wednesday.

CFO Peter Oppenheimer said the company has not been able to keep its preferred 4-6 weeks of inventory. "We sold every iPad 2 we could make during the quarter and would have liked to have ended the quarter with more channel inventory."

A total of 4.67 million iPads were sold—including both the older and newer models. The company recognized $2.8 billion on revenue on both iPads and accessories.

"The demand on the iPad 2 has been staggering," said Chief Operating Officer Tim Cook. "I wish we could have produced a lot more iPad 2s because there were a lot of people waiting for them."

Neither executive pinpointed the cause of the shortfall, deflecting questions about whether forecasting was the cause. They did say, however, that the shortfall was not due to the Japan tsunami, which they said had not impacted supply chains for any of their products, thanks to contingency planning.

The new iPad 2 was announced in early March and went on sale in the United States on March 11. It was in another 25 countries by the end of the month. Cook said the device will roll out to 13 more countries next week and "even more" by the end of the year.

Part of the demand is being driven by businesses. Oppenheimer said the devices are being adopted by the enterprise "at an unprecedented rate"—75% of Fortune 500 companies are either deploying or testing it, including, Oppenheimer said, Xerox, ADP, Boston Scientific, Estee Lauder, Rite Aid, and Disney.

The iPad is also making traction in the schoolroom. Schools picked up as many iPads as they did Macs last quarter, Cook said. "This was surprising to me," he said. "K-12 is even more conservative than enterprise in adopting new technology."

The iPads' performance in the educational market "really demonstrates what kind of opportunity there probably is there," he said.

Cook said Apple is suffering from "the mother of all backlogs" and will continue to crank out iPads as fast as it can. "I'm confident we're going to produce a very large number [in the coming quarter], whether that will be enough to meet demand I don't know," he said. "I'm not going to predict when supply and demand will come into balance."

Cook also did not offer a prediction on how many the company would produce or sell in the coming quarter.

E.B. Boyd is FastCompany.com’s Silicon Valley reporter. Twitter. Email.

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9 Comments

  • KuGuevara

    If Apple were to manufacturer their products exclusively in the US, the retail costs would rise - significantly. Reflected in the ~$500 price of the current ipad2, is the $1/hour wage, no health care/pension overhead of the Chinese factory worker. If the ipad were assembled by a $15/hr worker, what do you think it would sell for? $2,000? $4,000? Would you buy an $800 ipod shuffle? Neither would I. Neither would 200M other people.

    While it would be nice to have these things manufactured in the US, it simply isn't realistic. Unless the average American worker is willing to work 10 hour days, 6 days/week at $140/month.

    It's good business to manufacture where your customers are, but it's better business to manufacture where your costs are lowered by 87%.

  • Chris Reich

    Nonsense.

    #1 Who said move ALL manufacturing here? Not I.
    #2 Taking jobs away also takes away customers. The day is coming that the US isn't going to be a very good market for toys as the middle class scrambles for food and gasoline.
    #3 Just how much labor goes into most products made today? Not that much. You imply that cost of a product would rise 87%. I doubt costs would rise 20%.

    The REAL issue isn't labor costs. It's the escape from regulation and taxation---which feed into costs---but that is an area the government CAN correct.

    Chris Reich
    www.TeachU.com

  • Greg

    By your logic Apple should set up manufacturing base in the Northeast or the West Coast since those are where the demand is highest? Why build a data center in rural NC, right?

    The majority of electronics device is nowadays manufactured by a handful of contract manufacturers like Foxconn, and there are reasons for that: economy of scale, flexibility, etc. Regulation and taxation only play a (minor) part.

    Let's face it the real strengths of Apple are innovation and design. Returning to manufacturing means it would have to learn a whole new set of tricks, dealing with an entirely new set of issues, on top of the mountain of issues facing it already.

    But no doubts about it, the moment manufacturing here makes sense, Apple, or HP or Dell for that matter, will do so. When would that happen? when products are highly personalized to the taste of individual consumers. Would that happen to consumer electronics? I hope so.

    Also, why insist on low-level manufacturing jobs? Make American education, healthcare and tourism heaven. Move toward tomorrow manufacturing technologies -- mass customization, green tech, bio tech.

  • Tayro Knight

    In general, Apple needs to open themselves to other markets, having them stand alone against other competitors is senseless cause they already have risen to the top considering the fact that they had already ran out of their own product. Their supply and demand can expand with the dependency and coordination of other great technology markets. Intentional dependency IS ideal.

    Tayro Knight
    www.gamerstop.info

  • Chris Reich

    Maybe, just maybe Apple should consider opening an assembly here in the U.S.!!! They are making enough money aren't they? Would it sink the company to make something in the country doing the most consuming of Apple goods???

    As much as I respect Apple, I abhor the greed of companies making BILLIONS while manufacturing in China.

    Three things:
    ETHICS
    REBUILD OUR MANUFACTURING BASE
    FIX OUR BROKEN EDUCATION SYSTEM

    Come on Apple, you can afford to create a few more 'jobs' here in the U.S.

    Chris Reich
    www.TeachU.com

  • DoctorMontalban

    Bah, this isn't charity. Businesses are rational (and global). Incentivize them to move manufacturing back here and they will, don't and they won't. Go complain to your congressman and senate representative if you're so riled up. That's where you'll find some of that greed you're complaining about.

  • Chris Reich

    Greed is too pervasive in business and government. That's why business needs a refresher on ethics.

    It's good business to manufacture where your customers are. Apple might expand that limited MacBase of theirs.

    Greed is taking this country down and government is at the [beckon] call of business. If Apple WANTED incentives to open a factory here they would get them. Hell, the incentives are already in place. Look at the billions in stimulus money---create a job, get money. Pretty easy.

    You bet I'm riled up.

    Chris Reich
    www.TeachU.com

  • Joel Lopez

    Most new consumer electronics lack efficiency in their supply chain at launch date to anticipate such demand like the Ipad has had. This can be seen with every new Apple launch and its almost mandatory for the release of new video game systems.

    A new manufacturing plant in the US would not increase production of these products since the bottle neck is occurring in the supply stage; frankly the US does not have the natural resources to start supplying all the hundreds of components that comprise the Ipad anyway.

    Does this conclusion settle the argument on whether corporations are inherently evil? No.
    But it does provide some insight into the logistics of consumer electronics and why opening up assembly plants in the US would not improve distribution.

    I'm assuming that's what you were trying to infer in your post Mr. Reich when you were saying that we should make the products here in the U.S. Maybe it wasn't.

  • Chris Reich

    No.

    I was implying, no, directly stating, that I believe a company which profits largely from the US consumer has a responsibility to keep some work in this country. I personally don't give a damn about their "supply chain" or efficiencies. Move the damn supply chain here too.

    I'm talking about a moral obligation to do right by the home team.

    When Apple makes billions it benefits, indirectly, the shareholders. I want to see manufacturing return to this country and I'm sick of the excuses and jargon that are mere cover for greed. Apple makes more money by utilizing dirt cheap labor in China. I think that's wrong. Clear?

    Apple is not alone so I don't mean to single them out. But I work with many companies who are fighting to continue to produce goods in the US. Those companies have my full support and admiration.

    Chris Reich
    www.TeachU.com