‘Apple sells over 5 million iPhone 5, supply
constraints loom’
Analysis 1
Introduction
Desires are unlimited but not all desires can
be satisfied. Scarcity is faced by all. This article looks at a high demand
over a good and its influence on the amount being supplied. The quantity
demanded for iphone 5 was so high that it ran out of supplies. Apple is not supplying
enough iphone to meet its demand and since iphone is a highly valued good
worldwide, their limitation affects the demands worldwide. Largest factory that
assembles parts of Apple closed down, Apple lacks labor and Apple’s key
suppliers for screens are struggling with high cost and debt. Furthermore,
shortage of iphone supplies also influence people’s choice of Smartphone
especially considering apple’s stiff competition with Samsung Electronics.
Referring to the article, it’s announced that
over 5 million iphone were sold in three days since it was released to the
market. However the company was not able to meet demand since its initial
supply was insufficient. What I know based on a factual account is that there
were 8 million demands for the Smarphone when it hit the stores but only 5
million was produced. This clearly
demonstrates that there was a shortage of 3 million iPhones.
The graph shows the demand curve shifting
rightward showing the increase in quantity demanded for iphone 5. The new
quantity demanded was 8 million while the quantity supplied was only 5 million
and since the quantity demanded exceeded the quantity supplied of iphone 5, there
was a shortage of 3 million iphones. Preference is the reason for the increase
in the quantity demanded for the iPhone 5.
Consumer’s placed high value on this particular product therefore there
is a strong demand. Many positive phrases that indicate strong demand for
iPhone 5 were pointed out in the article which includes, ‘most valuable
company, sales could have been much higher, white hot expectation, topped sales
of iphone 4s, expected to sell 46.5 million in December, accounts for half of
its annual revenues and sold 5 million in three days. This shows that the fans
of iphone are so incredible that as soon as the product becomes available,
consumers will run to catch it.
However,
even though Apple is considered
to be the world’s most valued company, its limitations can have significant
effects. Quite a few negative phrases in terms of iphone’s supply were also pointed
out in the article which includes, ‘Struggle to meet demand; disappointment,
limitation, fallen behind schedule, stiff competition and would not be
available’. This indicates that expectations were not met and many consumers
were unsatisfied. Looking at how Samsung Electronics Co Ltd, Apple’s strong
rival has already topped the sales of Smartphone, limitation of iPhone 5 during this particular
period can have a significant impact on Apple since consumers can substitute to
Samsung Smartphone. However, it can be argued in terms of preference. Since iPhone
and Samsung have its unique characteristics, consumers that prefer iPhone are
willing to wait for the iPhone and not substitute for Samsung. Taking both the
information into consideration, it can be agreed that demand for iPhone 5 is
relatively elastic.
Apple’s insufficient supply occurred as a
result of these issues. First of all, Sharp Corp, Apples main key supplier that
supplies screen has been facing trouble with high costs and raising funds to
pay debt and therefore the new iPhone’s display is not on schedule. The Japanese company is finding
it hard to reduce screen defects. Secondly, Foxconn Technology, Apple’s largest contract manufacturer that assembles
and make parts for Apple’s iPhone 5 closed a factory in the northern China.
This shows that Apple lack suppliers and labors to supply the new iPhone.
The iPhone Smartphone production is slowing
down due to these issues and this causes the decrease in the
quantity supplied of iPhone 5. Looking at figure 1, the supply curve has
shifted towards the left indicating the decrease in the quantity of iPhone
supplied. For Sharp Corp to overcome the
issue of high cost and to pay off debts Apple can charge higher for the iphone
and that can maximize profit. Demands for iPhone 5 are already very high a
little price increase won’t make a very big difference. The supply is perfectly inelastic as indicated
in figure 2. This is because Apple in shortage of supply and they need the products
at any cost in order to satisfy millions of demands.
Figure 1
Figure 2
Lack of labor decreases output. Looking at
the graph shown below, to shift from B to C or to increase the number of iPhone
5 in the short run, Apple must increase the amount of labor for Foxconn. As what I have heard, they are already
planning to increase labor and machinery but I however believe that it is not
an easy prospect to ramp up and build another million iPhones. It will take at
least sometime for millions of iPhone to reach stores.
It can be agreed that this shortage may not be a
long term problem and that Apple will get special treatment from its suppliers
and Apple is making efforts to meet the huge demand for the iPhone 5 but they will
however have to do a very good job on that.
Conclusion
To sum it up, Apple is
in shortage iPhone 5 in which 3 million demands were not met. Apple is the most valued company in the world
so the inefficient supply of iPhone affects demands worldwide. Considering how Samsung
now leads the sales of Smartphones, its limitation during a particular period can
influence consumers into substituting iPhone for Samsung. However, the demands
for Apple were so strong that 5 million were sold in 3 days so that proves that
as soon as iPhone supplies becomes available, people will line up for it. Limitations
of the new iPhone were due screen defects, high cost and lack of people to
assemble the phone. Apple is making efforts to meet huge demand for iPhone 5
but however, it’s
not an easy prospect to ramp up and build another million iPhones since demands
of Apple are very strong. Facing issues to do with technology and lack of labor
will surely slow down production.
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