The iPhone 6 Supply Chain
Ever wonder how the iPhone in your hand actually made it to your hand ?
Check out this interesting article on Apple’s supply chain history:
It was the year Apple bought up all available air freight.
Before Steve Jobs returned to Apple in 1997, their hardware was usually shipped by sea. But for Jobs, the first major release on his watch, the iconic translucent iMac was going to be moved quick in order to make it available for Christmas. Jobs proceeded to buy up all holiday air freight space.
“Apple may have booked every cargo flight from China to the U.S. on three major freight carriers for two weeks, to deliver enough iPhone 6 units to fulfill demand when the phone launches on Sept. 19.” [Source]
When Compaq tried to ship goods by air closer to the holiday, it found that there was no space left.
In 2012, Apple did it again, leading to a 20% DHL rate hike when Apple took up capacity shipping the 3rd generation iPad.
If you look through Gartner’s top 25 supply chains over the past 5 years, you’ll notice a trend. Ten different companies have made the top five in the past five years. Four have made it once then dropped off. Only Apple has been on the list five times…and only Apple has been at number one every time. Check it out:
Much like other Apple products, the iPhone supply chain is incredibly complex.
In 2013, it seems like the 3G iPhone was created by 9 companies in 5 different countries before being assembled in Shenzhen. That same research indicates that in 2009, iPhone exports to the US were responsible for a whopping 0.8% of the total US trade deficit ($1.9 billion).
By 2012, China was exporting $22.38 billion worth of iPhones annually. By the time it came around to the iPhone 5 and iPhone 5C, the iPhone included parts from suppliers in 20 different locations, with the global supply chain saving Apple $4.2 billion dollars it would have spent producing the phone in the US..
Apple continues to be a major powerhouse.. The company crushed sales in 2013, where they sold almost 250 million iPads, iPhones and iPods.
So we’ve established that Apple was huge and that it has a huge supply chain. Let’s take a look at how that came into play during the iPhone 6 release.
The iPhone 6 Supply Chain Impact
People wanted to get their hands on the phone and they wanted it quick. Over four million devices were sold on preorder within the first 24 hours, selling twice as fast as the iPhone 5 did in September 2012. Demand grew so quickly that by September 19, when the iPhone 6 first shipped, Apple’s online store was reporting delays of weeks to two months.
And just like Jobs did 17 years ago, it seems like in August 2014 Apple may have booked every cargo flight from China to the US on 3 carriers for a full two weeks. Pictures of the iPhone shipment bonanza quickly surfaced, beginning with a proud pilot taking a picture with 195,000 iPhones on a 747 from China to Alaska, destined to continue to Chicago.
Apple’s supply chain is big enough that it can have a huge impact on full countries (not surprising, given that its $600 billion dollar market cap is worth more than the GDP of South Africa). Like before, the iPhone shipment limited up available capacity for all forwarders. But it didn’t take the industry by surprise. While a lot of airlines vied to ship the iPhones from Foxconn’s Zhengzhou manufacturing facilities, the entire supply chain was prepared. Over a year ago, the vice-chairman of the International Air Cargo Association was quoted saying:
The new iPhone launch is going to be a massive boost to air cargo.
And while the numbers are still not out, Cathay Pacific’s air cargo figures in August already spiked by 20% compared to August 2013, moving over 145 thousand tons of cargo in a month.
Apple’s success was not without casualties though. Smaller handset manufacturers are being forced to wait until October to ship, so that they can secure better rates. And the US economy is also taking a hit; by locating manufacturing facilities outside of the US, Apple saved $4.2 billion on iPhone 5 production.
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