Smartphones: why agile supply chains are critical

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Supply chain agility is not just about responding quickly to disruptive events – it is also about taking advantage of market opportunities that might open up unexpectedly.

Take for the example, the news that Samsung is recalling its new Galaxy Note 7 because of a risk that the battery can catch fire. Samsung says there have been 35 such incidents globally, but it is reported that up to 2.5 million phones could be affected.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

If you are one of Samsung’s rivals, Apple for instance, then that must be an opportunity. As luck would have it, Apple is expected to unveil its new iPhone 7 tomorrow, 7th September.

And, according “Digitimes”, the Taiwanese IT magazine, Apple is now pushing its supply chain partners to increase deliveries of components by ten per cent from its original predictions.

It’s worth pointing out that the gloss has gone off the mobile phone market recently. A Gartner report in June suggested that growth in smartphone sales would be mere seven per cent in 2016 reaching 1.5 billion units. In 2015, growth was 14.4 per cent.

“Today, the smartphone market has reached 90 per cent penetration in the mature markets of North America, Western Europe, Japan and Mature Asia/Pacific, slowing future growth,” said Gartner. “Furthermore, users in these regions are not replacing or upgrading their smartphone as often as in previous years.”

Shipments of Apple’s iPhone 6 reached 30 million units a month in the second half of 2015, according to the “Digitimes” report. And the prediction is that that shipments of new iPhone devices in the second half of 2016 will reach only 60 per cent of the 2015 figure.

What this means, of course, is that there is an opportunity for a big win if Apple’s supply chain is agile enough to respond and satisfy any increase in demand.

And Samsung is not standing still – it has moved quickly to offer replacements. So the window of opportunity is relatively limited for Samsung’s competitors to take advantage.

If the uplift is relatively short-lived, that will also have an impact on how far supply chain partners are will to commit themselves. The situation is complicated by the fact that Samsung is also a major supplier to Apple.

Will Apple get a sales uplift – and will its supply chain partners be able to move quickly enough to satisfy any increase in demand? The answers, when they come, will say a lot about the state of hi-tech supply chains.

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