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  • Foxconn Slowdown Portends Trouble for Apple, iPad 2 Production

    The reported slowdown in production at the Foxconn facilities in China is not only sparking concerns about further iPad 2 supply shortages, but also spooking Wall Street Analysts, some of whom are now downgrading shares of Apple to "market perform." Just this morning JMP Securities analyst Alex Gauna downgraded Apple from “market outperform” - a rarity in recent years on Wall Street.

    According to a note to investors, Gauna made the downgrade projection based on what he's hearing about Foxconn. Subsequently, Gauna says he made the call “to reflect risk associated with the notable deceleration in its primary manufacturing partner Hon Hai (Foxconn) that was emerging even prior to the amplified uncertainty created by developments in Japan.”

    We don’t know the source of the Hon Hai deceleration, but possible causes could include simply in-line iPhone sales due to more significant Android competition, weakness in computing products as tablet demand grows, and/or product transition risk around the iPad 2. While we see Apple’s five-year track record of upside surprises (averaging 23%) and YTD outperformance (AAPL +7.1% vs S&P 500 +1.9%) as exposing the stock to near-term downside risk towards its $300 [200-day moving average].
    Of course, Apple has a long record of surpassing Wall Street expectations. Still, the problem at Foxconn is exponentially more worrisome than any analyst's stock projection. As production slows and demand for the iPad 2 reaches fever pitch domestically (and soon globally), the supply shortages following Apple's most recent product launch could be far worse than any supply shortage Apple has faced before.

    Source: Wall Street Journal
    This article was originally published in forum thread: Foxconn Slowdown Portends Trouble for Apple, iPad 2 Production started by Michael Essany View original post
    Comments 13 Comments
    1. ODB25's Avatar
      ODB25 -
    1. delusion950's Avatar
      delusion950 -
      Apple will solve this fast.
    1. TheDirtyDiddler's Avatar
      TheDirtyDiddler -
      Hope it's back up to speed in time for iPhone 5.
    1. infamoushack's Avatar
      infamoushack -
      Be glad the factory didn't get swept by the tsunami. That would stop production completely.
    1. adrian1480's Avatar
      adrian1480 -
      Quote Originally Posted by delusion950 View Post
      Apple will solve this fast.
      Apple doesn't have any power to do anything about this. They don't have a plant to fab their own chips. As such, they're completely at the mercy of the capacity levels of those they contract with. They could add additional suppliers, but it's unlikely that anyone could add meaningful amounts of product into the pool to alleviate the burden on Foxconn.

      Summary: Apple will be pushing them to do more, but in the end, it's all on Foxconn's ability to manage this bottleneck.

      Me? I'm glad I'm totally content with my iPad 1 or I'd be very anxious right now. iPad 2's are going on eBay for 2x their asking price.
    1. iphone565's Avatar
      iphone565 -
      Quote Originally Posted by infamoushack View Post
      Be glad the factory didn't get swept by the tsunami. That would stop production completely.
      You should really invest in a globe.
    1. J0relle's Avatar
      J0relle -
      Quote Originally Posted by iphone565 View Post
      you should really invest in a globe.
    1. perealb's Avatar
      perealb -
      How can an analyst be so misinformed? It's so stupid that it sounds fishy.
    1. thetoothfairy's Avatar
      thetoothfairy -
      Patience! And as far as Apples shares... everything on Wall Street is down right now...
    1. bigboyz's Avatar
      bigboyz -
      I don't believe there is anything to solve...Wall Street already predicted 300,000 iPad 2's to sell upon launch...APPLE crushed that haha! These stories are funny to me. They are opinions just like our responses...treat them as such :]
    1. mmaboi21's Avatar
      mmaboi21 -
      Edit: deleted
    1. Daerid's Avatar
      Daerid -
      I'm reading this on my iPad 2, and relatively unconcerned...
    1. matrixhunter's Avatar
      matrixhunter -
      Quote Originally Posted by Daerid View Post
      I'm reading this on my iPad 2, and relatively unconcerned...
      How dare u mock others that don't have their iPad 2"s yet lol jk jk :P