Japan jolt puts Apple in jeopardy

Japan jolt puts Apple in jeopardy

Apple iPad 2

The unusually sharp drop, which was twice as large as the decline in technology shares over all, was driven in part by worries over the impact that the crisis in Japan would have on Apple’s ability to make its blockbuster products. It didn’t help that the iPad 2, latest Apple gadget that everyone seems to want to get their hands on, appears to be in increasingly short supply, a situation Apple has found itself in before.

Any problems affecting Apple’s supply chain in Japan will not affect finished products for weeks, analysts say. But some investors fear that Apple’s challenges in meeting demand for a product like the iPad 2 will simply get worse in the months to come as some critical components are delayed.

Many companies would be happy to have Apple’s problem of high demand for their products. But Apple, like other technology companies, is at risk of being buffeted by the unfolding crisis in Japan.

Every major computer and consumer electronics maker relies on components that directly or indirectly come from Japan. Apple’s success, though, combined with its recurring difficulties in meeting the demand for some its hottest products, including the iPad and iPhone, have prompted investors to single out the company.

Figuring out the precise impact on Apple of the disruptions in Japan is more art than science. The company, which declined to comment for this article, is intensely secretive about its supply chain. While other companies typically don’t talk about whom they buy parts from, analysts say Apple takes secrecy particularly seriously and will cut off any supplier that it suspects of being loose-lipped.

New concern

Analysts highlighted new concern: 300-millimeter wafers, which are silicon disks used to manufacture essential chips for iPhone and iPad. A factory operated by Shin-Etsu in Shirakawa, in northern Japan, produces at least 15 per cent of world’s supply of wafers and is not likely to become operational for a long time.

Apple has faced challenges in meeting demand as far back as 2004, when it first released the iPod Mini. The iPhone has been in tight supply since Apple introduced it in 2007. And only in the most recent quarter, Apple managed to end the backlog for the original iPad.