John Paczkowski

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Apple Supply Chain on Solid Ground Despite Japan Quake

If Apple’s second-quarter iPad 2 sales missed Wall Street expectations, it wasn’t because of supply-chain troubles following the earthquake and tsunami in Japan. Remarkably, those catastrophes didn’t disrupt the company’s component supplies in the second quarter at all.

And according to COO Tim Cook, they’re not likely to disrupt them in the third quarter, either.

“We source hundreds, literally hundreds of items from Japan, and they range from components such as LCDs, optical drives, NAND flash and DRAM, to base materials such as resins, coatings, and foil that are part of the production process of several layers back in the supply chain,” Cook said during the company’s earnings call Wednesday. “The earthquake and subsequent tsunami and the associated nuclear crisis caused disruption for many of these suppliers. And many unaffected suppliers have been impacted by power interruptions.”

“But since the disaster, Apple employees have literally been working around the clock with our supplier partners in Japan and have been able to implement a number of contingency plans. Our preference from the beginning of this tragedy has been to remain with our long-term partners in Japan, and I have to say they have displayed an incredible resilience that I’ve personally never seen before in the aftermath of this disaster.”

That said, Cook cautioned that the situation in Japan remains volatile. “We know of no issue today that we view as unsolvable,” he said. “But the situation is still uncertain and there’s obviously no guarantees.”

The real impact of the disaster in Japan, then, will be on Apple’s revenue. To that end, Cook said he expects third quarter revenues to take a $200 million hit, which the company has already factored into its guidance. “[But that] economic impact pales in comparison to the human impact.”