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Hard Drive Shortage Behind iPod Mini Global Delay

TMO Reports - Hard Drive Shortage Behind iPod Mini Global Delay

by , 3:30 PM EST, March 25th, 2004

Apple Computer confirmed to The Mac Observer Thursday that its announcement in delaying worldwide release of the iPod mini to July is due to a shortage of Hitachi-made hard drives.

"We're consuming almost all of those drives that are being made," Stan Ng, Director of iPod Worldwide Product Marketing, told The Mac Observer. "So we're putting them in iPod minis as quick as we can get them and trying to get them out as quickly as possible.

"The four gigabyte, one-inch drive is a new technology and is really on the cutting edge" he said. "(The manufacturer) is ramping up production to high volumes as soon as possible."

A Hitachi spokesman confirmed to The Mac Observer that the drive has been in "great demand" and that the company has not been able to make enough of the product. The company said it began ramping up production to higher capacity in the last two weeks and expects to start meeting demand "in the next few months."

Neither Hitachi nor Apple have officially confirmed Hitachi makes the iPod drives, but it is widely known among industry watchers that Apple is using the Hitachi drive. In addition, Hitachi is the only manufacturer of a 4GB, one-inch size hard drive. Apple uses a 1.8-inch drive, also made by Hitachi, in the current generation of the Apple iPod.

Earlier Thursday, Apple announced that it was moving the worldwide availability of its iPod mini to July because demand in the United States has outstripped the expected supply through the end of June. Apple said it expected to ramp up its manufacturing of the iPod mini to meet worldwide demand in the July quarter.

Ng characterized the announcement as not a delay but as a "reallocation of the supply that we had planned through June."

"The demand in the US for the iPod mini has just been incredible," Ng said. "It's just been stronger than I think anyone could have expected and that demand is going to consume all the planned supply through June. We were kind of faced with some hard decisions of wanting to make sure we provided the product worldwide but not spreading it so thin that people couldn't buy them."

When asked if Apple underestimated the popularity of the iPod mini in not making enough, Ng responded: "I think we expected it was going to a hit...but demand was stronger than we expected in the US and there was a ramp-up period for these new technologies such as the drive."

Ng would not speculate on whether or not the worldwide delay of the portable player will affect sales internationally.

Analysts believe the decision to delay worldwide sales was the right one, given the momentum of sales in the US.

"They've got a solid market here that is moving product," said Steve Baker, analyst with NPD. "It makes no sense to shut off the supply when the demand appears to be so high. In Europe, because they haven't gotten the product yet, they can continue to build the 'buzz' about its coming. Once you start shipping a product (in the US), you've got to find a way to satisfy demand both from a customer standpoint and a retailer standpoint."

During February, the iPod player was the top portable music player at retail in the US, according to NPD Techworld. iPod unit sales, including two weeks of iPod mini unit sales, captured 33 percent of unit sales - a jump of eight percent since January. NPD's numbers do not include sales of iPod's through the Apple retail or online store.

MP3 competitors lagged far behind Apple's MP3 player dominance at 13.5 percent for RCA, 13.0 percent for Rio and 10.0 percent for iRiver.

Ng said Apple will re-assess pricing of the iPod mini for Europe before the product is available in July, as it promised back in January.

"The currencies are so volatile these days that speculating now or back in January is just premature," Ng said. "As we get closer to that July date, we'll definitely take a look at the (European) pricing, re-evaluate and see what's appropriate for the kind of climate of the currencies at the time."

There was some criticism of the iPod pricing for Europe when it was first announced, with many saying it was not equal in value to that of the price Americans were paying. For example, Apple currently plans on selling the iPod mini in Great Britain for £199.00 including VAT. At today's currency rates, the price would be equal to US$360.00 - US$110 more than the American price tag.

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