Apple 2011: iPad sales hit 40 million

June 30, 2011 11:21 AM EDT

By Jonny Evans

Apple [AAPL] is on target to sell up to 40 million iPads this calendar year as it tweaks its supply chain to meet huge demand. Meanwhile Android-based tablets remain dead in the water, and Amazon's own 'iPad-killer' is already beset by predicted component supply challenges.


Staggering demand

Apple's financial year (September 2010 - September 2011) will see the company sell between 32 million and 34 million iPads -- that's 342.8 percent growth.

As you can see in the chart above, it's difficult to make a strong analysis based on iPad growth figures as the results are volatile, not excepting that only six quarters of sales figures are available. The figures for Q3 and Q4 of 2011 are the median numbers extracted from a Digitimes report (see below).

In addition, Q2 2011 saw sales growth decline 35 percent, as consumers held back on their iPad purchases in hope of the new model. Apple "only" sold 4.694 million iPads in that period.

After months of anxious component procurement planning and the need to find a replacement for Samsung's roles as flash storage, display and A5 chip supplier, Apple is preparing to burst out with iPad sales in the fourth quarter.

iPad production hits 14 million

Digitimes tells us that Apple "is set to ship 12-14 million units in the quarter, up from 7-9 million units in the second [current] quarter."

The company has been gathering components during the current quarter in order to minimize any supply challenges in the next.

The report tells us that Apple's upstream component suppliers, including LG, Catcher, TPK and Radiant Opto-Electronics all benefit from these huge sales. That's also why Apple was recently able to demand component suppliers deliver a 10 percent price reduction for their parts, on strength of the sheer volume of sales.

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Apple has been scouring far and wide for iPad displays. For example, Wintek was recently contracted to deliver higher quantities of iPhone and iPad displays.

This has posed a problem for competitors. Amazon hopes to ship four million of its own Android-based tablets, but has faced challenges yielding firm supply commitments from display manufacturers.

"Wintek has also landed a fair amount of orders from Apple recently and will see its revenues edge higher in the third quarter. However, the company also revealed that its production schedule will become tight in the second half of the year and it may be difficult for the company to accommodate orders from Amazon," a report informs.

[ABOVE: I can't recall many consumer electronics products getting this kind of attention.]

Exceeding expectations

Led by Apple, tablet sales are growing at a phenomenal pace. In April, Canaccord Genuity analyst Mike Walkley raised his iPad sales estimates from 34 million to 36.5 million units for this calendar year. Analyst Charlie Wolf over at Needhams anticipates 30 million iPad sales in 2011.

Apple is going to exceed these estimates, delivering in the region of 36.6 million - 40.6 million (or more) iPad sales this year. Why do I suggest this?

  • Digitimes  sources suggest 8 million iPad sales in the current quarter.
  • They also predict 12-14 million sales in Q3
  • Apple is likely to achieve similar targets in Q4, the Christmas quarter.

Walkley's 2012 estimates see 54 million iPad sales. That's broadly in line with growth seen so far. Since launch, Apple has enjoyed approximately 22 percent quarterly growth.

The Digitimes Q2 and Q3 production estimates figures suggest Apple has raised production to meet with rapidly climbing demand, and as Apple hasn't yet been able to meet demand it is extremely difficult to figure out the full extent of potential sales.

Company execs have consistently complained at being unable to build these tablets fast enough.

"The iPad has the mother of all backlogs that we're working very, very hard to get out to customers as quickly as we can," said Apple COO Tim Cook during the most recent financial call. Cook also described demand as"staggering" elsewhere during the call.

[ABOVE: Infographic detail from.}

iPad competitors remain D.O.A.

So what? Essentially, Apple has never been able to fully service demand for its post-PC product, meaning there's an upside to these estimates -- there's a chance to sell more. Such "staggering" sales also mean component makers will prioritise Cupertino's orders, because they're worth a whole lot of money.

Competitors haven't got a chance to match the device on price.

Can they match it on features? Not yet.

Apple's app ecosystem will drive future growth. As of today, there are 100,000 iPad apps available at the App Store. No other platform has this.

That's what drove Needham's Wolf to say: "While competitors have rushed to launch competing tablets, they have made an imperceptible dent in the trajectory of iPad sales." He added, "They have been unable to undercut the price of the iPad; and they're fallen woefully short in matching its features, ease-of-use and the number of applications written for the device."

This isn't just a numbers story. iPad users are a satisfied bunch, just check JD Power or Changewave data. Once they take an Apple tablet, they don't want to quit, and even if they do then apps act as agents to ensure customer retention. At the end of this year, Apple is likely to achieve sales of its fifty millionth iPad (combining iPad and iPad 2).

That's 50 million early adopting tablet customers that Apple's competitors will have to work extremely hard to bring over to the other side.

Not everything is beautiful

Apple will discuss its FY Q3 on July 19. That's when we'll find out how close Digitimes' estimated 7-9 million iPad sales in the current quarter are to reality.

Stellar iPad projections are unlikely to be enough to prevent Apple taking a bumpy ride on Wall Street in the coming weeks. A Bloomberg report warns Apple will reveal its worst performance for three years when it reveals its third financial quarter.

The company is expected to deliver an average quarter, reflecting slowing iPhone sales impacted by lack of  iPhone 5 and other elements of Apple's business stalling in preparation for OS X Lion. Investors are also anxious about the health of Steve Jobs.

All the same, when it comes to iPads -- arguably the future of the consumer electronics industry -- many might take comfort in the fact that even at the median 38.6 million iPad sales for 2011 forecast, Apple is now selling more than one iPad every second, every minute, of every day. (An estimated 1.22 iPads per second, in fact). No one else in the space comes close, nor, in the current comptitive component supply chain fandango, is it possible to.

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