Apple is reportedly reducing its fourth-quarter orders by 25 percent from the company's iPad parts suppliers based in Asia, according to a JP Morgan Chase investor note released Sunday. The cutback suggests that Apple will only take delivery of 13 million iPad 2 units in the seasonally strong final quarter of this year -- down from the investment firm's prior estimate of 17 million units.
Market rumors cited Monday by Taiwan-based industry-trade publication DigiTimes suggest that iPad demand is slowing down and that Apple may be forced to cut the price of the iPad 2 as rivals introduce lower-priced models. For example, Amazon is expected to unveil a rival tablet in the $199 to $250 price range this week running a customized version of Google's Android mobile platform.
However, the significance of Apple's iPad supply-chain adjustments remains unclear. Among other things, Apple may be moving to clear its iPad 2 inventories in advance of the launch of a new model early next year that is designed to fully leverage the capabilities of iOS 5.
Following a recent trip to Asia, Piper Jaffray's analysts said Monday they remain confident in their iPad estimates of 10 million and 12 million for the final two quarters of calendar year 2011.
"While we heard chatter of supply-chain order reductions, the absolute sell-in figures for second-half 2011 likely remain well above our estimates," Piper Jaffray analysts Gene Munster and Andrew Murphy wrote in an investor note released Monday.
Analysts Maintain Prior iPad Estimates
Piper Jaffray's analysts continue to expect Apple's full-year iPad sales to reach -- or even exceed -- 35.9 million units.
"We are modeling for second-half 2011 iPad unit [shipments] of 22 million -- up 91 percent year over year from 11.5 million in the second half of calendar year 2010," Murphy said in an email.
According to Piper Jaffray, prior analyst calls based on sell-in or supply-chain data have, for the most part, proven to have very little correlation with Apple's results in the past.
"Apple purposely maintains enough suppliers and manufacturing partners to make any one supply-side data point inconclusive," Munster and Murphy explained. "For example, Apple is currently transitioning to Brazilian iPad manufacturing, which may be impacting Asian manufacturing numbers."
A Mixed Blessing for Android
Gartner expects that Apple's iPad will command a 73.4 percent share of the global tablet market this year by shipping 46.7 million iPads -- an estimate that is considerably higher than what financial analysts now expect. By contrast, Gartner expects Android-based tablets to only account for 17.3 percent of the global tablet market this year.
On Thursday, Gartner reduced its Android OS tablet forecast for the remainder of 2011 by 28 percent in comparison with the research firm's midyear projections.
"So far, Android's appeal in the tablet market has been constrained by high prices, weak user interface and limited tablet applications," said Carolina Milanesi, research vice president on Gartner's mobile-devices team.
Moreover, Milanesi said Gartner's 2011 Android tablet estimate would have been even greater had it not been for the success of lower-end models in Asia as well as the high expectations surrounding Amazon's launch of a new tablet in advance of this year's holiday shopping season.
"Although we expect sales of the Amazon tablet to impact Apple, the main impact will actually be on other Android players," Milanesi said.