Why the iPhone Shortage has no Significance

3 04 2008

Recently, many news sources have been reporting about the shortage of iPhones at the Apple Retail Stores, and online at the Apple Online Store. While the shortage is growing, there is no true significance to it.

The Great iPhone Shortage
The iPhone shortage has hit the United States.

Friday of last week, reports first circulated that the three flagship Apple Stores were running low on iPhones- in fact, completely selling out towards the end of the day. Some originally speculated that this is a sign of a product refresh- but the shortage isn’t because of a second generation iPhone. The main cause of the issue is most likely the cut in manufacturing initiated by Apple earlier this year. On February 1st, 2008; AppleInsider published an article based on research from Banc of America stating Apple was cutting iPhone and iPod production for the March quarter.

“[Still], we remain concerned that iPhone production and demand are lackluster,” he explained. “After several data-points in December and early January indicated large production cuts of 50%+ to iPhone production for the March quarter, our recent checks reveal that production levels are 40–55% higher for [the first calendar quarter of 2008], than the recent cuts originally suggested, although still down significantly from two months ago.”
You can read the full article here.

While they speculated that the demand was shrinking, or might shrink, it appears that the demand is still strong- or strong enough to produce the current shortage we are facing. While the March quarter is traditionally one the the slowest for the iPod, it appears that Apple has underestimated the demand that still remains for the iPhone. While it is rumored that the second generation iPhone, with 3G will be making its way to our hands before years end, I think it is too early to attribute the shortage to an upcoming product release. This is why:

International stock of the iPhone is still at normal levels. Especially in Europe, where 3G has been a standard for years, you can still buy an iPhone at an Apple Store today. Europe is a prime target for a 3G iPhone- we will probably see a large boost in sales because of a 3G iPhone in the International market. If Apple is clearing out stock of iPhones in anticipation of a new model, Europe would be suffering from the same shortage. Another explanation for the iPhone shortage could be a slight strategical move on Apples part to boost iPhone numbers. While an iPhone shipped to an Apple Retail Store doesn’t count as revenue for Apple, shipping one to an AT&T Store does. Finally, while normally reserved, Apple has responded to comments about the shortage. In response to an email from Saul Hansell, after writing an article about the iPhone shortage for the New York Times, Steve Dowling says:

“We are working to replenish iPhone supplies as quickly as we can,” he said to me reading the same statement he offered to others. “Our stores continue to receive shipments almost every day.”

When Apple responds to something with that kind of detail, it usually means that they aren’t trying to hide something. Sorry guys, it looks like the second generation iPhone is still another month or two away. But, who really knows- we can only take an educated guess. If anything, the shortage demonstrates the continued demand for the Jesus Phone, even while rumors are stirring about the upcoming 3G update.



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