A key aspect of Apple’s (NASDAQ: AAPL) success is the flexibility and robustness of its supply chain. It has been so carefully engineered that sharp spikes in demand rarely keep new products off store shelves for more than a day or two. Consumers anxious to buy Apple products do not wait very long.
Samsung has begun to worry that its supply chain is broken, at least partially. Shin Jong-kyun, the president of Samsung’s mobile communications business, said his employer could sell 10 million Galaxy S III smartphone models in the two months after its launch, if it can build the products. If it cannot, Apple may get its iPhone 5 out in time, and in great enough numbers, to flank its primary rival.
Samsung’s failure to procure sufficient mobile components for its latest smartphone has stoked concerns that its second-quarter smartphone sales could be much lower than expected. Shin said the company expects to resolve the supply issues with mobile components sometime in the next week.
Consumer electronics companies often find that logistics, and a shortage of just one critical part, can cause “next week” to stretch out into the week after and the week after that. Some U.S. carriers have said that they will be short of supplies of the new smartphone and will delay their first shipments to customers.
Apple appears to have been caught flat-footed by the Galaxy S III, which beat the iPhone 5 to market by at least a month. Apple’s most recent version of the iPhone, the iPhone 4S, does not work on superfast 4G networks. That is a significant drawback when carriers are marketing the new service aggressively. Samsung has several smartphones that work on these networks. Its new flagship has a number of “iPhone-like” features, as well as hardware and software that work on 4G.
Apple has a few weeks, or perhaps another month or two, to get the new iPhone to market if it wants to challenge Samsung immediately. The iPhone 5 almost certainly will work on 4G networks. Samsung’s early mover advantage could disappear due to supply problems. That could give Apple just enough time to launch a product that will have extraordinary demand.
Douglas A. McIntyre