Video iPod in Demand

BusinessWeek reports on the early success of Apple's video iPod and the fact that demand may be outstripping supply. Shaw Wu at American Technology Research said, "They can't seem to build them fast enough."

One of the potential bottlenecks could be the shortage of specific components. Vinita Jakhanwal at iSuppli opined it was probably "a light-emitting diode backlight used to brighten the display screen." She said, "They're going into iPods, but they're also going into cell phones. The lead times for these backlights has gotten longer in recent weeks." Another area of concern was supplies for the LCD display. "Adding a second supplier would certainly help meet demand," Jakhanwal added.

Although Apple has claimed over a million video downloads already, Steve Lidberg at Pacific Crest Securities said, "That number of downloads shows that Apple has built a very strong user base, but I think it's a mistake to tie downloads directly to use on an iPod."

Trying to determine the number of video iPods sold based on video downloads is an inexact science. Shawn Slayton at SG Cowen said, "You put a hammer in your hand and you go looking for nails." Slayton expects Apple to sell between 7 million and 8 million of the video iPods in 2006.

Slayton added that "I have a forecast for about 40 million high-capacity media players being sold next year. About 15 million of those will have hard drives, and I think 7 to 8 million of those will come from Apple, and the rest will come from other vendors."