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Apple admits iPhone 3GS in short supply

The next 1.3 billion must wait

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Apple has admitted what's been rumored for weeks: It can't make enough iPhone 3GS smartphones to keep up with demand.

Early in his prepared remarks that opened Tuesday's conference call with reporters and analysts detailing Apple's quarterly financial results, Apple CFO Peter Oppenheimer said: "We are current unable to make enough iPhone 3GSs to meet robust demand, and we're working to address this."

During a question-and-answer session after Oppenheimer's canned statement, Apple COO Tim Cook echoed his CFO's words, saying that "The iPhone 3GS is currently constrained in virtually every country we're shipping in...and we're working very hard to fulfill that demand."

When asked how long this sales-stifling condition might persist, Cook answered "I don't want to predict today when supply and demand will balance. I know that it will not balance in the short term. And I don't want to give a prediction, because as you can guess it's very difficult to gauge the demand without having the supply there to find out what it is."

Where iPhone 3GS models aren't available, it's of course possible that some shoppers are turning to the less-expensive iPhone 3G.

Cook, however, declined to give figures on the mix of 3GS and 3G units being sold or to predict what that mix will be in the future, saying only that "I think it's too early to tell what the ultimate mix of this product will be, because as you know, the iPhone 3GS is constrained, and also its only shipping in 18 countries out of the 80-plus that we're in."

He did, however, indicate that iPhone 3GS scarcity wasn't severe enough to drastically curtail its worldwide roll-out. "I believe the vast majority of the countries that we are selling the 3G in will be selling the 3GS by the end of the fiscal quarter," he said. Apple's current fiscal quarter will end on September 30th.

Apple's sights are set on both getting the iPhone 3GS into the hands of buyers in its current market and on adding more countries to its list.

"We are working very hard to continue expanding distribution within the countries that we're in where it makes sense to do so," said Cook, "and to add new countries because the world has more than 80 countries."

After noting that Jobs and Co. "recognize there are some large markets left uncovered currently," Cook was asked specifically about the largest market of all: China.

"It continues to be a priority project," he said, "and we hope to be there within a year."

Although parsing statements made during an earnings call is always a dicey business, we couldn't help but notice that Cook said "within a year" and not "within the year."

The long-rumored ChiPhone has been just around the corner for quite some time. Talks with China Mobile reportedly broke off in early 2008, China Unicom was reported to have reached a deal with Apple in February of this year, and last month, the China Economic News Service told the world that the ChiPhone would appear this month.

The 10 days left in July are certainly far fewer than the 365 in Tim Cook's "a year."

But thanks to today's conference call, we may have learned one reason for the delay in opening up China to the iPhone: adding 1.3 billion customers to a market that Apple is already having trouble feeding with top-end iPhones would not be good business. ®

Bootnote

No, Steve Jobs didn't participate in today's conference call. And none of the questioning analysts was impolitic - or spunky - enough to ask why.

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