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Thread: Foxconn Slowdown Portends Trouble for Apple, iPad 2 Production

  1. #1
    MMi Staff Writer Michael Essany's Avatar
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    Default 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

  2. #2
    Green Apple
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    Crap.

  3. #3
    My iPhone is a Part of Me delusion950's Avatar
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    Apple will solve this fast.

  4. #4
    My iPhone is a Part of Me TheDirtyDiddler's Avatar
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    Hope it's back up to speed in time for iPhone 5.

  5. #5
    Be glad the factory didn't get swept by the tsunami. That would stop production completely.

  6. #6
    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.

  7. #7
    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.

  8. #8
    Quote Originally Posted by iphone565 View Post
    you should really invest in a globe.
    lol

  9. #9
    How can an analyst be so misinformed? It's so stupid that it sounds fishy.

  10. #10
    Retired Moderator thetoothfairy's Avatar
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    Patience! And as far as Apples shares... everything on Wall Street is down right now...

  11. #11
    Livin the iPhone Life bigboyz's Avatar
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    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 :]

  12. #12
    Starbucks Artist mmaboi21's Avatar
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    Edit: deleted

  13. #13
    iPhone? More like MyPhone Daerid's Avatar
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    I'm reading this on my iPad 2, and relatively unconcerned...

  14. #14
    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

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