If Apple is increasing manufacturing capacity at or near 100% per year, when does capacity begin to out-pace market demand for the device output of that capacity?
This question came to mind while reading a post on the Asymco blog, How did I get the iPhone number so wrong (part II).
Surely there is some maximum number of units that this capacity can fill. How do you find the point where capacity growth needs to slow so that the plant remains highly efficient? IE, capacity does not out pace market demand by a significant margin.
Consider the iPhone, even if every person on Earth had one, max market capacity would be equal to all of human life on Earth. Perhaps it would be worth while to find markets of people to exclude to find a max market demand for the product. From there, one might need to factor out people who are unable to afford the iPhone under current prices and with current purchasing plans. Certainly these market segments could be served by finding or creating a pricing and payment system that allows more people to afford and acquire an iPhone. This payment and affordability innovation may not occur, or Apple may choose not to play there because it hurts average earnings per unit to the point where total profits increase at a slower rate or actually decrease. There is a cost to serving all market segments.
NOTES & MORE (+ questions)
Upgrade cycle: Is it every 2 years? Is a new device coming every 15-18 months now?
Do people wait when there are rumors of a new device?
Market demand may fluctuate on a quarterly basis. An iPad makes a nice Christmas gift and perhaps schools will buy a large volume in July and August to gear up for a new school year. For a device like the iPad there is probably a significant drop off in demand after the holiday season.
Smart phones are becoming the new standard for mobile phones. Not everyone will use this ‘computer in your had’ to its fullest, some may not use it for much more than calls. There will most likely be a large segment that will use apps to do more things and solve new problems by having a smartphone.