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Why the Apple Inc. Watch Shortage Might Soon Be Over

By Ashraf Eassa – May 19, 2015 at 2:05PM

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A report from DigiTimes says that Apple Watch manufacturing partner, Quanta, has enough capacity to fill "all" of Apple's orders.

Want to go out and hand your hard-earned dollars to Apple (AAPL -1.76%) in exchange for a shiny, new Apple Watch? Well, as of right now, you are out of luck. According to the Apple website, many Apple Watch variants will not even ship until July.

This, DigiTimes says, led to rumors that Quanta Computer -- a manufacturing partner for the Apple Watch -- is seeing a "poor yield rate" in the manufacturing of these devices.

However, it seems that Quanta Computer, reportedly commenting on said rumors, had some good news to share with respect to Apple Watch production (note: Quanta did not explicitly state the client for whom it is building these devices, but it is obvious that the company is referring to Apple).

Neither technology nor quality are challenges
DigiTimes says that Quanta Computer vice chairman CC Leung claims that building the Apple Watch is "no longer a challenge to Quanta in both technology and quality."

In fact, the report goes on to say that "labor shortages during the Lunar New Year holidays" were one of the key culprits behind the relatively low Apple Watch production volumes. Quanta reportedly had to "borrow manpower from other manufacturers," which led the company to deliver only "limited shipments" during the quarter before Apple Watch shipments began proper.

Thankfully, for customers itching to get ahold of the Apple Watch, the manufacturing situation looks set to get much better.

Sufficient capacity now in place
Quanta reportedly said that it has "sufficient capacity to manufacture all the orders [for the Apple Watch]." This, DigiTimes says, means Quanta will see a "giant contribution from its wearable device business" during the second quarter.

If that is the case, then perhaps Apple will be able to finally reach supply/demand balance over the next quarter or two for its smartwatch.

Now the fun begins for Apple and its customers
At this point, it is hard to know what kind of demand Apple is seeing for the device. Some reports say Apple saw pre-orders to the tune of 2.3 million devices shortly after launch.

If that is true, it would indicate that demand for the Apple Watch has, to put it mildly, far exceeded the demand for all other smartwatches combined thus far.

If the comments from Quanta are accurate, then Apple investors, as well as investors in the various component suppliers, should soon begin to see the revenue roll in from sales of the wearable. If this revenue is substantial, then the Apple Watch may wind up being the "next big thing" some investors thought it would be, opening up substantial new revenue streams for both Apple and its suppliers.

Keep an eye on Apple Watch shipment times
Now that we have Quanta Computer reportedly saying it has the capacity in place to fill "all" Apple Watch orders, I am going to keep a close eye on shipment times. If they start coming down from July over the next week or two, that might be a sign Apple is getting closer to meeting demand levels for the Apple Watch. 

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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