Is Apple Subject to Laws of Gravity?


It seems the shine may be off the...fruit, and Apple may very well become a tech company like all others, and just as subject to the laws of physics, notes Paul McWilliams of Next Inning Technology Research.

The big buzz is a rumor that Apple (AAPL) has substantially reduced orders to iPhone 5 suppliers. By some estimates, orders have been cut back by as much as 50%.

First, this isn't new news-there were stories about order reductions in the market in early December. Second, I doubt orders have been reduced by 50%. Third, I don't think the reductions are fully attributable (or even mostly attributable) to a lack of market demand for the iPhone 5. Fourth, where are the stories about the surge in iPhone 4S demand?

As you might recall, shortly after the launch of the iPhone 5, the headlines were full of stories about production problems at AAPL's manufacturing partner, Foxconn, as well as stories about shortages of Liquid Crystal Display (LCD) screens. However, there were no material claims that more run of the mill component parts were in short supply.

However, even if only one part is short (the LCD screens in this case), it meant that AAPL was unable to keep pace with initial demand. With rollouts scheduled in China and other countries, AAPL needed to react.

What normally happens when there is a shortage in the tech industry is customers over-order (the term "double-order" is commonly used here) in hopes that they will at least get enough to keep pace with demand.