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The Globe and Mail

New iPad faces delivery backlogs in disaster aftermath

Customers try the latest Ipad 2 at the Apple store on Fifth Avenue in New York, March 11, 2011.


Earthquake-related plant closures in Japan may further strain the already-stretched supply of the world's most popular tablet computer.

The second generation of Apple Inc.'s iPad went on sale this month in the United States., and is due for release in Canada and 24 other countries on Friday. The device is believed to be outselling even the original iPad, one of the fastest-selling mobile computers in history. Analysts estimate Apple sold between 500,000 and one million iPad 2 units during the device's first weekend of availability in the U.S. - during the same time period immediately after the original iPad launch last year, Apple sold 300,000 units.

However, the research firm IHS iSuppli, which has been closely following the impact of the earthquake on Japan's technology companies, said several of the iPad 2's internal components are built in Japan, including its electronic compass, battery and likely its glass screen. The earthquake has affected, to varying degrees, plants of some of Apple's suppliers in Japan, such as Toshiba, which makes flash-memory hardware.

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"While some of these suppliers reported that their facilities were undamaged, delivery of components from all of these companies is likely to be impacted at least to some degree by logistical issues now plaguing most Japanese industries in the quake zone," iSuppli said. "The various challenges are being compounded by interruptions in the electricity supply, which can have a major impact on delicate processes, such as semiconductor lithography."

The supply disruptions come at a time when Apple is struggling to meet higher-than-expected demand for its wildly popular tablet. Shipping time for online orders from the company's website has repeatedly increased, jumping from just a few days to up to four weeks today.

(Apple recently announced it is delaying the release of the iPad 2 in Japan, a decision that appears to have been prompted by the continuing crisis in the country, rather than supply issues.)

Apple's supply pressures are not unique. There are, by some estimates, more than 30 companies selling or producing next-generation tablets, and many of those - as well as their hardware suppliers - have large production facilities in Japan.

Apple may bear the greatest burden, however, partly because its tablets are in such high demand. In a recent survey by shopping site PriceGrabber, 87 per cent of U.S. respondents said the iPad is the tablet they would most like to receive as a gift (Samsung's Galaxy tablet came in second place, with 5 per cent).

In addition, the iPad 2's thinner frame and sophisticated design mean that parts cannot be easily replaced with hardware from other countries or manufacturers.

The Japanese crisis has had a particularly severe impact on the production of semiconductors, which are vital components of virtually all electronics. According to BMO Nesbitt Burns Inc., Japan represents roughly 24 per cent of the worldwide supply of semiconductor wafers. Of all the country's technology industries, semiconductor manufacturing may be the slowest to recover, as the complex production process is particularly susceptible to aftershocks.

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"Earthquakes ranging from four to seven on the Richter scale will make it impossible to really restart these [fabrication plants]until the earthquakes stop happening with such frequency," said Dale Ford of iSuppli. "Every time a quake tops five, the equipment automatically shuts down."

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