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Again and again, {complink 379|Apple Inc.} turns what would be tantamount to disaster for many other companies into a widely celebrated success. It's not a lesson in best-practices, and I certainly wouldn't recommend it for any other company, but the supply snafu surrounding the recently launched iPad is another example of how Apple can be treated differently from others in its group.
Reports indicate that the new iPad is already “out of stock,” even before the formal available-for-sale date of March 16. In all countries where the new iPad (as opposed to iPad 2) is scheduled to be released — France, Germany, Japan, Switzerland, the UK, and the US — Apple is telling customers the product is already sold out. Delays are now running two to three weeks in some countries. In the US, AT&T and Verizon are only accepting customers' email addresses for later notification. Translation? They have no clue when the product will be available.
In a normal world, this would be considered a disaster. Apple either failed to anticipate demand for the new iPad, or it purposely tightened supply to create an artificial shortage. Given Apple's record, I am inclined to say the company didn't build enough redundancy into its system to satisfy what it should have known would be very strong demand. This was the type of supply chain failure that Apple continues to repeat with each product launch — and for which it has yet to pay a price.
If demand for competing products had been as strong, and if those products were in sufficient supply, Apple would have found a solution to this problem. This points clearly to a staggering failure on the part of its competitors.
In Apple Land — that rarefied world populated by folks who believe anything Apple is golden — this is a buying and selling opportunity, rather than a supply chain failure. Those lucky to get their hands on the new iPad are trying to sell the device on eBay for up to three times the $499 value of the base item. Apple's stock price is rocketing higher and looked likely this morning to push through its 52-week high of $548.21, further propelling the company's market value past the $500 billion mark.
Well, surprise! Right after I wrote the above paragraph, I checked the premarket trading and noticed that Apple had already surged past its 52-week high to $549.50 and was rising. The shares jumped to a new high of $550 when the market opened today, and they may climb even higher. The stock performance is reflected in an EBN poll asking people whether they would sell Apple shares now or wait for further appreciation. When the poll was posted last week, respondents were split on the question, but over the weekend, they shifted overwhelmingly toward holding rather than selling. More than half the respondents have selected “Sell? That would be crazy.” (See Crazy about Apple.)
Crazy about Apple would seem to sum it up. But there's more at play here. What else could be driving the stock appreciation so soon after the iPad launch? It certainly isn't just the new product. Most pundits and some consumers have called it underwhelming. Contrary to expectations, the new iPad features only incremental improvements to the iPad 2, mainly in the display and camera.
The upswing in market valuation is due partly to the demand for the new iPad, which is so strong that potential buyers are being told to wait. A spokeswoman for Apple has said the demand is “off the charts.” I don't know what chart the company is using, but perhaps it needs to build a new one. This one stinks.
Bolaji: My initial reaction was a lot less charitable than yours. How many times has Apple been around this block? Three, four or more? And they still can't estimate demand? The industry's biggest company, with a market cap of more than many nations, that has created the must-have technology devices of the past decade, has once again been caught unaware that demand outstripped supply?
The only thing surprising about this is people actually continue to believe it.
Apple provided no details on this great success. It only said the iPad sold out. What's not clear is how many the company manufactured for the launch, 400, 4000, 400,000, 4 million? What's even more irritating about this — aside from potential customers left to scramble — is the unquestioning statements from analysts and journalists proclaiming how the new iPad was an outstanding success. What exactly is being measured here and what are the criteria used to determine success? When also is Apple going to stop playing this game and who will question the company about it?
Apple does not live in a normal world. It's apparent. This is a common trend with the company each time a new product is launched. I'm tempted to think Apple is deliberately creating an artificial shortage. I think it's a strategy on Apple's part. A strategy that's it's worth paying dearly for. On the contrary it's paying off for the company on the back of a hyped review. Amazing!
It may be that Apple is more concerend about quality of their product. They give breathing time to engineers and manufacturer`s to provide parts in quantity with no compromise in quality. This is very sound approach.
If that's the case then Apple is using the first set of buyers as guinea pigs. Would that be a correct assessment?
@Bolaji @Anna I'm amazed that people do not demand that information. A sell out sounds impressive, but one can make just about anything a sell out if the numbers are planned to fall short of demand. Apple must have a pretty good idea idea of the number of people who were in the market for its latest release and could well have planned on the right output to keep some disappointed, which would increase demand for the next round.
Counterfeit parts continue to plague industries with no end in sight. RFID, along with other technologies like machine-to-machine (M2M) applications, in which covert and overt tracking devices communicate on cellular and in some instances satellite networks can complement RFID and other passive and active tagging technologies.
Counterfeit parts, which are effectively inferior parts or even worse totally useless parts, are a major concern across many industries, not only the electronics industry. The pharmaceutical, chemical and medical industries continue to struggle with counterfeiting issues, which can be life threatening. Retailers are also plagued with counterfeiting within their supply chains. As supply chains become more global in nature with increased touch points, counterfeiting will continue to increase exponentially. Unfortunately counterfeiters are becoming smarter as well in their counterfeiting methods.
To help tackle these problems, companies, manufacturers and suppliers must implement effective asset tracking, track and trace, and in some instances advanced serialization systems. Implementing M2M technologies to assist in tracking and global positioning can enhance the level of security and visibility. These types of solutions will increase visibility within the supply chain and identify weak links that can be addressed and corrected. Companies at a minimum should be starting to investigate strategies and intelligent approaches in tackling counterfeiting.
Applied DNA Sciences (APDN) is currently working with the US Department of Defense on what might be the “cutting edge” in Anti-counterfeiting technology. Their initial trials, using botanical DNA, have proved very encouraging, and they have since entered into expanded studies with SMT and Altera. Please check them out and let me know what you think.
Openers, I will be writing about biotech for DNA applications. The tallest hurdle we will have to jump is mass authentication. The DNA ID is at the chip level and we have to be able to have low cost equipment and means for the small to mid-size companies as well. This field of research is too underfunded now and it will be up to private enterprise to crack this nut. There are some really great ceramic (MaterialsScience) technologies coming soon. Feel free to add your knowledge to this topic. The more we know, the better prepared we will all be to fight our personal anti-counterfeit battles.
Dave, No doubt you are correct. We may all end up with many parallel resources for counterfeit detection. There is a methodologies coupled with RFID, called rules based tracking that every company will be pressed into thoroughly verifying their supply chain partner's invulnerability to counterfeiting. Rules based tracks time and sequence as a product moves through the company's known supply lines. Still, that one-to-one exchange issue could be the biggest fly in the ointment. If some employee in the supply chain is compromised, then RFID tags could be switched at birth. Whose baby is it? The wrist band says it is mine, but it doesn't have my DNA.
Douglas: Your anecdote about the RFID tags made me LOL, although I know that wasn't the intention. Here's why it struck me as ridiculous: we continue to develop technology that is supposed to help us protect our technology but we are being outdone by technology at every turn. After 20 years of watching this unfold, I am beginning to believe that there is a low-tech way to deal with this: make sure boards and chips are destroyed when they are supposed to be destroyed. Instead of a 60 minutes crew, install security cameras at disposal sites. Do unannounced spot visits and audits. Inspect the vehicles that are entering and leaving these sites. Increase the penalties for noncompliance. Sure, this will cost money, but not as much as equipping the entire electronics industry with RFID tags and scanning equipment. I am beginning to wonder whether the industry really wants to eliminate counterfeiting at all. After all, anti-counterfeiting technology seems to be a booming market.
And yes, counterfeiters may still build chips from scratch. But that has to be a drop in the bucket compared to the volume of recycled/refurbished chips that are available from scrap.
Barbara,
I bought a blender after watching a YouTube series “Will it blend?” I mean this blender took an iphone and ground it to black powder. It did occur to me that we should have giant crusher centers where all our E-Waste gets ground to powder and then the recyclable materials are reclaimed. However intriguing the idea of an e-Waste smoothie might be, I'm sure it is not practical. Maybe some other version, but I think a low tech solution that is universally accessible is the best solution of all. Now, what that is, well that is the $64,000 dollar question. I think I just dated myself.
To Anna's point: In Boston, we used to have a saying that excused the behavior of one of our best Red Sox players. “That's Manny being Manny.” Guess what happened? Boston eventually tired of his antics and traded him. Arrogance is only amusing for so long, and then people tire of it, no matter how good your performance is.
Great Article! As an independent supplier of components here is what we face everyday….. we use test houses for authenticity testing of board level components. It is getting to the point where our highly reputable, “customer directed” test houses will not stand behind their own authenticity tests of a component. All after they have decapped, consulted w/ the mfg of the component and have done full functionality tests. This is not the case on every component that requires this testing but the incident rate is becoming more and more prevelant……..and we are using test houses sanctioned and approved by milspec/aero OEMs which build for gvt contracts……………..how do we combat this when the pro's won't guarantee authenticity??? Very frustrating …..yet challenging!
Douglas, You didn't address how pervasive counterfeiting is in the electronics industry. Could this be one reason why not too much attention is being paid to this problem? Or is it possible nobody wants to be known as the company whose products are targeted by counterfeiters?
Bolaji,
There may be some sensitivity as to who wants to admit in particular that they have a counterfeiting problem with their supplier, but it is not just limited to electronics as I am sure you are aware. I just had a short talk with a company that provides water distillation systems and they said they had a recurring problem with a pump source. At design Con I met a major connector company that said when his customers started complaining about poor product, it turned out that the connectors were bootlegged and the plating was radically different. The part marking was forged. I will be interviewing this vivtimized company's officer soon. I know that drugs, cosmetics, white goods, clothing, jewelery, watches, etc have been “knocked off” for years. How else could I explain owning two genuine Rolex watches that I purchased in Taiwan for $20 each back in the early 80's? When I took them to a watch maker here in the uS, he got out his loop and hemmed and grunted for awhile and then asked me if they were real. I could have purchased genuine Guchi leather goods for about the same price….from the next outdoor stall to the right. The problem is very significant in the Electronics industry because the techniques for counterfeiting run the gammet from factories running two legitimate shifts, with a third shift using less qualified workers and no QC, to empty IC packages…no die whatsoever. In the latter case, the counterfeiter has access to some pretty significant equipment. That means we're up against some big money and organized criminals with well established transport mechanisms.
Rohscompliant,
Boy! That is ugly! In the coming weeks, I will look at who shoulders the liability for counterfeit parts as it relates to the Supply Chain.. If there is no real accountability, then that implies the motivation level to resolve the problem may be lower than needed. Definitely worth exploring that issue. Thanks for bringing it to our attention.
Douglas–you and me both! I'll counter your $64,000 question with a Bass-O-Matic and raise you an 8-track
Barbara,
Throw is a Willie Mays Card and a pack of Black Jack gum, and you got yourself a deal.
Do you actually foresee a time when the war is reduced to a few skirmishes rather than a full blown assault and efforts to defend the supply chain?
If you work in design and manufacturing with extreme pressure for time to market, you wish for need to give time to these engineers. If no, there may be another problem like one with Apple iPhone with Antenna problem.
Like I said before 95% of the countfiet product comes from CHINA.
I love counterfiet product Rolex Watches, Purses, Jewlery, I just want to know when I'm buy couterfiet product. I don't want a counterfiet Sony TV, Golf Clubs, Chey Volt made in CHINA, Etc. I really don't want counterfiet units in the Electronics of Military product, Boeing Aircraft, Military weapons, etc.
Bust some contract manufactors that are buying counterfiet units, take them to trial, put it in the new paper, internet, then lets see what happens.
I have no experience with non-electronic parts which are being counterfeited, however, it seems to me that we are all missing the point of how to eliminate the counterfeiting which is going on in the electronics industry's supply chains.
If the counterfeiters did not have any of the scrap material to use for counterfeiting, ( i.e. if you dried up their supply) then their ability to remove parts, remark them and sell them as new parts would be gone. I believe, as do others, that we would be served best if we did all the scrapping of used, old, unwanted electronic items here in the United States, where the reclamation of the desired materials could be done correctly and under our supervision. We need to stop shipping this unwanted material offshore, and, instead, do the reclamation here.
In order to do this, we would have to set up special centers where the scrap is processed. We could use currently unemployed workers to perform this work, and pay them out of the vast amount of money which is currently being spent on the effort to defeat the present counterfeit problem. We should keep the government out of the process, since we do not need an additional bureaucratic cost, and, instead, use one of the existing professional entities such as UL, or IEEE, or even NASA Goddard instead.
Those Component Engineers who have written specifications for parts for years would have the necessary knowledge on how to write the necessary specifications on how to reclaim and separate the desired materials obtainable from the scrap, such as gold, silver, lead and silicon. Perhaps you might have to throw a few metallurgists into the mix, along with people who know how to get rid of the excess ceramic which would result in order to get an efficient method defined, but there are plenty of unemployed people out there who could do this, and we should tap into this vast resource.
Passive parts such as resistors, capacitors, inductors, etcetera, would also be included into the reclamation mix, and anything else which might be of value, such as the metal from old washing machines & dryers, and other things – the list goes on and on. Let's keep our resources here and make appropriate use of them, instead of shipping them elsewhere (costly), and paying shipping cost (costly) for the resultant materials to return here as raw product. The cost of doing this could be shared by a variety of means (TBD), but a majority could come from the cost savings achieved by not having to test everything before using it.
If this was done here, in the US, it would provide jobs for the unemployed, but, most importantly, it would dry up the material used by the counterfeiters to make their spurious parts. If it were found that scrap electronic items were still being shipped offshore, the fines imposed on these offenders would also add to the amount of money available to perform the reclamation here in the US.
Yes, it would require oversight to impose and maintain, but the cost savings would be enormous. Imagine what it'd be like, if you didn't have to worry about counterfeiting and could only do the testing which is performed routinely. Do you believe that this would improve your bottom line? I do.
Now to address some of the comments in this thread:
@Dave : I fully agree with you that the pharmaceutical, chemical and medical industries also have a major problem with counterfeiting, but addressing items outside the electronic industry is not within my purview. Thus, since this is so far outside my solutions experience, I feel that it is prudent to leave to others better qualified than I am, to solve the non-electronics counterfeiting which is occurring. My best solution for the electronics industry (how to do it, I don't know for these industries) is to find a means of drying up their supply, but as I see it, this may not a perfect solution either, since the counterfeiting processes elsewhere are different.
@opeters & Douglas : I believe that we are trying to use very technical means to solve the problem, and that maybe we need to step back and look at how we can solve it using the “why” procedure to which Douglas referred above. In my opinion, if we “why” enough, we'll ultimately come to a simple solution (The easiest things are the hardest to find).
@Barbara : Why are we trying to “technology” the problem? Why not simplify and “cut them off at the pass” – eliminate their source of product to use for counterfeiting. Put the unemployed here to work solving the problem, don't give any raw material to the counterfeiters in China by not sending it there , make the visits and audits here in the US (much less costly than overseas) and shorten the length of time it takes to obtain the desired raw materials from the waste. The anti-counterfeiting industry is becoming like the border patrol along our southern border – too much effort expended and not enough results. Let's use the “KISS” principle. I won't go into how we could slam the southern border shut – it'd be “politically incorrect”.
@Douglas : You're correct – let's go low tech, keep the waste product in the US & use presently unemployed workers to recycle the product here & keep the shipping costs down. Use unemployed CE's to write the recycling specs, etc., as discussed above and solve your $64,000 question.
@RoHScompliant: If I had a testing facility tell me that they would not guarantee the authenticity of a product which they were testing for me, I would cancel the testing contract and look elsewhere for someone who would stand behind their product & services. There's no excuse for that kind of attitude. It also implies that they're not doing a good job for you since they don't want to guarantee their work.
@Bolagi : Product contaminated by counterfeit parts is a well-known problem within the manufacturing industries discussed above (& probably others too). I believe that we need to cut them off at the foot by denying them raw material, rather than trying to find out if they've raped us after the fact. Let's be proactive rather than reactive. Also, let's get the emotions out of it – let's get the problem solved as fast and effectively as possible and work together for the common good (Impossible ?)
@Barbara: I wonder what Douglas did with his black powder after he “blended” his i-phone, and in what condition was the blender when he was through. I thought that I had a twisted sense of humor, but that is a weird thing to do.
@ Barbara & Douglas : I'll bump you both up with a recording of “Yes we have no bananas” just to make the game interesting.
@Bolaji : They couldn't fight a war if there was no material with which to fight.
@all: Yes I'm a radical thinker, but I believe that simpler is better.
Bolaji,
I think we will see an increase before we see a drop in counterfeit parts. I believe it takes time to educate and focus. Just as companies have documented expectations and agreements with their regular suppliers, I think, in the not too distant future, we will see proactive statements from distributors and wholesalers announcing anti-counterfeiting measures with correlating metrics in order to gain new customers' confidences. It will become a selling and marketing point as they will substantiate their claims with reports declaring so many parts sold with no returns for counterfeit etc. Likewise, customers will require that the suppliers have effective anti-counterfeiting measures in place before commencement of business. In a soon-to-be posted article titled “The Supplier Quality Audit”, I have included both REACH and RoHS Compliance and anti-counterfeiting measures on the survey criteria. If that happens universally, then most companies will move towards an organized and sytematic approach towards thwarting the counterfeiters now working through the various licit supply chains. Maybe then we will see a reduction, but as the saying almost goes, build a better mousetrap and from the ones that got away, you'll create a race of super intelligent, highly evolved, criminally inclined, master race of malevolent rats.
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Yes this is quite true. Apple could have delayed the launch for suppliers to provide parts but they might not know the demand would be as strong.
I think this is one of Apple's strategies to impress people that its products are hot cake. It's now common that at any new release of iPad there is always shortage in supply where the demand is greater. It's become Apple's way giving impression that all the ipads role out are totally sold off.
The same experience when Apple released iPad 2, It's like Apple is deliberate in making its iPad demands chaotic.
What is wrong with people to wait for few more days or weeks? Apple needs to take calculated risk and take decision for best of its own interest.
JADEN, this might be true as well. Tim Cook should be the operation expert and yet it still happened. Apple may do this deliberately.
@ talex
I guess it is deliberate.
I don't think Apple is afraid of taking any risk in their supply, but they are just playing game.
So 99 percent it is on purpose. I believe if this was a real problem, someone might have been fired.
There should be a clear proppects authorities should have to share with the public. Best smoothie maker
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