Supply Chain Issues Resurface for Apple
According to a recent report from DigiTimes, Apple’s (NASDAQ:AAPL) supplier Foxconn Electronics is facing a shortage of both labor and material at its plants in China. [1] The report also suggests that these issues are likely to affect shipments of the iPad 2 and iPhone 4. Could these issues slow down Apple’s growth? It would be tough to knock Apple off its surging smartphone pace, where it has shown faster growth than competitors Research in Motion (NASDAQ:RIMM), Nokia (NYSE:NOK) and Motorola Mobility (NYSE:MMI).
Renewed Supply Chain Concerns
Supply chain issues previously surfaced when the recent Japanese earthquake led to product constraints and consequently higher prices for many of Apple’s component suppliers. However, Apple smartly avoided these issues by agreeing to absorb the additional costs related to components in exchange for smooth shipments (see Apple’s Move to Absorb Higher Component Costs Will Help iPad 2). This resulted in better than expected iPhone sales for Apple in the most recent quarter (see Apple Avoids Hiccups in Supply Chain, Raising Estimates on iPhone Outlook). Investors should take note of Apple’s approach to the renewed concerns.
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We currently maintain a $430 price estimate for Apple stock, implying a premium to market price.
See our complete analysis for Apple stock here
Notes:- Supply chain may not be able to satisfy demand from Apple, DigiTimes, May 12th 2011 [↩]