Notable Calls

Royal Bank of Scotland is out with some interesting comments on Apple (NASDAQ:AAPL) saying their supply suggest that Apple might reduce its 2011 iPad forecast to suppliers to c.35m units from 40m-45m units. Although a cut in Apple's forecast would be negative for sentiment toward the supply chain, RBS does not see a material impact on earnings.

Developments: Supply chain checks suggest that Apple will lower iPad outlook

- Our channel checks suggest that Apple (AAPL US, NR) may reduce the indication it gives to suppliers for 2011 iPad shipments to c.35m units from 40-45m units. The new forecast may be given to key suppliers as early as next week.

- We have heard three possible explanations for the reduced guidance: 1) difficulties in the manufacturing process as thinner glass in the touch module is more easily cracked, 2) component shortages which may have been caused by the Japan earthquake; and 3) delay to the iPad 3 which is currently scheduled for launch in 4Q11. Apple’s website is showing that shipping time for all models is 4-5 weeks, which indicates that demand should not be the cause of the lower target.

- There was also a shortage of the iPad 1 soon after launch due to yield issues on both the company’s A4 processor and touch panel modules. These issues were solved within 3-4 months.

Sensitivities: Impact on supply chain earnings minimal
- We currently forecast Apple to ship 35m iPads in 2011. However, the company usually gives optimistic forecast to its suppliers to ensure sufficient components. As a result, we see potential risks to our current forecasts.

Notablecalls: Not making a call here given the hectic tape, but I do think this iPad2 tid-bit is not widely known yet.

FIY ONLY

Digitimes: Component supply of iPad 2 still about 2-3 weeks; Foxconn to activate backup measures