How About Dem Apples?

iphone5-inside_1

After Wednesday’s Market close, Apple announced its fiscal 2013 1st Quarter results that ended on 29-DEC-12 and after hours trading is causing the stock to drop significantly.  The Market is a harsh mistress as evidenced by the following financial results that 99% of companies would kill for:

“Apple® today announced financial results for its 13-week fiscal 2013 first quarter ended December 29, 2012. The Company posted record quarterly revenue of $54.5 billion and record quarterly net profit of $13.1 billion, or $13.81 per diluted share. These results compare to revenue of $46.3 billion and net profit of $13.1 billion, or $13.87 per diluted share, in the 14-week year-ago quarter. Gross margin was 38.6 percent compared to 44.7 percent in the year-ago quarter. International sales accounted for 61 percent of the quarter’s revenue.”

That’s right, Apple reported a net quarterly profit of $13.1 billion (with a ‘b’) and the Market is treating them like they are going out of business!

Full disclosure here – I am not affiliated with Apple and I don’t own any of their stock but my family is an Apple family (we have 7 Apple products in the house right now).  While I’m an Apple fan and root for the company to do well, it was another part of the quarterly results from this WSJ article that startled me:

“Apple said it sold 47.8 million iPhones, up from 37 million from the year-earlier period and below some analyst expectations.”

Are you kidding me?  If Apple is selling 47.8 million iPhones over the course of 3 months then they are manufacturing at least 47.8 million phones in roughly that same time period (granted the manufacturing started before the product introduction).

As an Engineer who has worked in a manufacturing environment almost my whole career, making that many widgets in 3 months got me wondering what that volume broke down in weekly, daily and hourly rates since that is what we live by in the manufacturing world.

Assuming Apple’s iPhone manufacturing sites operate 24 hours a day/7 days a week (which I bet they do), 47.8 million iPhones in 3 months breaks down to:

525,275 iPhones per day

21,886 iPhones per hour

365 iPhones per minute

6 iPhones per second

I doubt Apple has just one manufacturing plant in the world and I would expect that they have about half a dozen for risk mitigation but even if you spread that volume over 6 plants, that still means an iPhone rolls off the assembly line every second!  And we still haven’t talked about other Apple products – Macs, iPods, iPads and iPad minis – and what that adds to the daily output of these manufacturing plants.

I am amazed at the supply chain involved, the communications/logistics involved with suppliers and the organization that is required to keep this behemoth of a manufacturing enterprise running 24/7.  I don’t know if you’ve ever seen a picture of the inside of an iPhone 5 but these widgets aren’t exactly trivial to assemble and the components aren’t exactly ‘off the shelf’ if you know what I mean – batteries, IC chips, screens, cases, cameras, buttons, connector cables, etc.  This means every Apple supplier is also manufacturing at least 47.8 million components and shipping them to Apple assembly plants around the world in the same time period.  Cranking out 47.8 million iPhones in 3 months is nothing short of incredible.

Apple CEO Tim Cook spoke to this at Wednesday’s conference:

“He urged investors to be skeptical of reports about the company cutting orders with manufacturers. Mr. Cook said Apple gets parts from various suppliers, and manufacturing efficiency can vary, making it hard to discern the company’s overall business based on individual pieces of information.”

As a fellow manufacturer of complex products (medical devices) I can wholeheartedly agree with Mr. Cook!  Getting all the pieces in place every day to meet your output objectives is why the Manufacturing sector is only suited for those who can take the daily pressures.  I give a big hat tip to Mr. Cook and the entire Apple team for their efforts.

One parting thought on this post – Notice that Apple was able to accomplish all this even though we don’t have an Apple Czar on Obama’s cabinet who is guiding the design/supply/manufacturing/sales of Smart Phones.  The Invisible Hand is still at work in a World that is demonizing Capitalism and moving towards Socialism.  I wonder how long we can continue to do this.

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2 Responses to How About Dem Apples?

  1. --Rick says:

    Those capitalist are so immoral and greedy. How dare they burden us with such convenience, luxury, opportunity with their filthy products. Tax the rich producers and give their bones to those overflowing with envy, jealousy and incompetence.

  2. I’ve never been an Apple guy, but I admit they make a heck of a product.
    But if we had an Apple Czar, the iPod would currently cost $4,500 and we’d never have even GOTTEN to the iPhone yet, not to mention the iPad, etc.,…

    Government and innovation: they’re not friends.

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