Apple Cuts Back iPad Orders by 25% for Q4 2011

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There is no doubt that Apple is the leading tablet provider today, with a projected 70% market share for 2011. But the Cupertino company is reportedly scaling back on iPad production by 25%. Is there anything to be worried about?

Analysts from JPMorgan Chase & Co say that Apple is reducing orders from vendors in China by as much as 25%. The reduction in orders could mean a drop from 17 million units to 13 million units shipped to Apple’s retail establishments and channel partners for Q4 2011. Suppliers from China, including Hon Hai Precision Industry Co — more commonly known as Foxconn — are often reliant on western brands for business, and Apple is reportedly Foxconn’s biggest client to date.

But what could have caused this sudden reduction in orders?

Oversupply. Analysts from RBS Asia say that Apple is likely to be reducing its inventory in the aim of ensuring iPads don’t get stockpiled in warehouses. Apple reportedly over-ordered units of the iPad 2 in order to lock suppliers into iPad production, thereby preventing these from having enough excess capacity to take orders from competing brands, like Android tablets. The slowing European economy might have also triggered the reduction in orders, amid a projected decline in demand in the region.

iPad 3 coming soon? Still, this might also be an indication that Apple’s suppliers will soon be retooling their production lines for an upgrade. But as Apple is currently in the lead in this market, it doesn’t necessarily have to hurry up with upgrading the iPad. As per product cycles, an update is likely due by spring 2012, although there are rumors that the iPad 3 will be released before end of 2011.

Moving production lines. Perhaps Apple’s cutting back in China means it’s looking elsewhere to produce the iPad. Apple could simply be moving production away from China to other facilities. Foxconn’s factory in Jundiai, Barzil is set to launch, and the ODM is likely to move some of its capacity there. The ministry of science and technology in Brazil has already confirmed that Foxconn’s facility is getting ready to start production.

Neither Apple nor Foxconn have provided a response to the matter. With the holiday season approaching, will we experience shortages in iPads, or does Apple have something else up its sleeve waiting for the right time to announce?