No recession for the iPhone

Apple scoffs at the global economic meltdown. No matter what happens, the people need to be connected

By Andrew Leonard
Published July 22, 2009 5:56PM (UTC)
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A visit to the mall a month ago suggested that even in the depths of a deep recession, there are at least two industries that, like cockroaches, seem able to survive any environment: footwear and cellphones. Apple's third-quarter earnings bolster my observations. The global economy may be contracting, but the iPhone universe keeps expanding.

From the Wall Street Journal:


Apple sold 5.2 million iPhones in the quarter, more than seven times what it sold a year earlier, as it released a new version and halved the price on an older model to $99. Revenue from the iPhone business tripled to $1.69 billion, eclipsing Apple's iPod revenue.

However, Apple's chief financial officer said on the earnings call something that slightly befuddled me: "We are currently unable to make enough iPhone 3GSs to meet demand and we're working to address that." With the flexibility, capacity and speed of modern high-tech production networks, how could such a thing be possible?

Calculated Risk may have spotted the answer to that question in another section of the earnings call, in which Apple executives noted that supplies of certain components such as DRAM memory and NAND flash memory are "constrained." Calculated Risk theorizes the constraints are a result of inventory cuts at the height of the economic downturn. That suggests that there might be some momentum for a broader-based economic recovery: If demand starts picking up, industries will have to rev up production lines, because there's nothing left in the warehouse.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Great Recession How The World Works Iphone Smart Phones