Let us dwell a few moments on real-life forecast error and another case of Apple related euphoria gone wild.
Over the weekend, Apple, Inc. new iPad tablet had its official public product launch where consumers were able to actually buy and take possession of their first iPad. Initial reports in the blogosphere and business media indicated longer-than-expected lines. A Wall Street Journal article (paid subscription may be required) noted that a Piper Jaffrey analyst actually doubled his initial forecast of first day sales estimates to a range of 600,000 to 700,000 units including pre-orders. That same analyst also raised his full year 2010 unit forecast to 5.5 million, from a previous 2.8 million units.
Research firm iSuppli went even further predicting that 7.1 million iPads would be sold on a worldwide basis in 2010. Forrester Research, on the other hand, remained conservative and predicted 3 million units.
This huge disparity stems from a number of different perceptions regarding consumers’ ultimate desires to have an iPad. The article rightfully notes that unlike the iPhone or the latest wiz bang personal computer, an iPad seems to be a device that consumers may want but not necessarily need in their day-to-day or hour-to-hour needs for a technology fix. This is also the first generation model of iPad, and experienced Apple consumers know that more functionality laden and perhaps cheaper priced models could be in the cards when later models are introduced to the market. Interesting enough, a recent teardown analysis conducted by Chipworks headlines a commentary noting that the current iPad‘s technology represents a big iPod Touch, which doesn’t exactly scream ‘buy me’ for the current price.
Supply Chain Matters being what we are will focus our commentary on the rather large forecast discrepancies. Consider the current situation that external analysts who supposedly know this market have a variance that now include a low of 3 million units to a high of as much as 7 million units. Perhaps Apple euphoria is a selective disease practiced by some. The brute reality of this crazy situation is that Apple has now publically reported that, in reality, it sold an actual 300,000 units in the first weekend, just about a half of the day-old Piper estimate.
Apple’s supply chain planners, having great success in planning the launch of other Apple products, purposely allowed three or so months to actually ramp-up production numbers to support product launch of the iPad. No doubt, these teams will know better than to plan the remainder of 2010 sales outputs based on such wide external forecast bandwidths. It is however interesting to note how Apple euphoria gone wild can play out among analysts.