Sunday, April 24, 2011
Apple's Reliance on Japan for Components Put Sales at Risk
The Japanese earthquake that occurred this past March has affected not only Japan, but the entire world. The effects are especially felt in the business sector, as any companies who relied on Japan for goods and services have abruptly been caught off from Japanese suppliers. One such company is Apple. Apple's third quarter forecasts for sales, profit and gross margin will be affected significantly due to disrupted manufacturing and higher component prices. For example, flash memory is a key component in making up the memory databases in Apple's Iphone, Ipad and Macbook Air products. Higher flash drive prices mean higher production costs for Apple. Flash memory is not the only components Apple relies on Japan for. Batteries, touch-screen glass, and resin used to attach chips are all key components imported to Apple from Japan. Increasing demand for Apple products last quarter means that Apple must secure access to these parts quickly in order to fulfill the rising demand for Apple products. Even though the catastrophic earthquake in Japan has crippled many businesses, Apple is in far better position than most other companies. This fact is solidified by Apples 59.7 billion dollars in cash and investments. Apple should be able to handle the manufacturing disruptions and still meet the market's demands.
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2 comments:
I think this is not going to have that big effect on the economy since Apple is just one of the many key players in our economy. Plus, most of Apple production is still in China and it can easily shift the components production to China. At the same time, the article has already mentioned "Apple is in far better position than most other companies". I think the writer has not done a good job on reporting the case, but rather exaggerating it to another level.
I agree with Tung, although I can see how it may affect Apple's sales a little, but not significantly. If the threat of affecting sales significantly had been there, then Apple has the genius and resources to temporarily move component production to a lower cost region until Japan heals.
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