The issues around cyber security and China continue to escalate. On Wednesday, the US released its annual China Economic and Security Review report which alleged that China Telecom re-routed traffic from the .mil and.gov domains for 18 minutes back in April. An article in Information Week today stated that “The level of access afforded by such a diversion also could have enabled the firm to conduct surveillance on specific users or sites, disrupt a data transaction, prevent a user from connecting to a site or send data somewhere a user did not intend, according to the report.” Beyond investigations, which have not been able to conclusively link the Chinese government to any of the security incidents, the US has already begun to restrict commercial activities of telecom equipment manufacturers such as Huawei and ZTE. If the tensions around cyber security continue to escalate I think it could have a dramatic impact on the high tech supply chain in coming years.
The summer of 2010 was a unique period in our history when consumer euphoria about a revolutionary wave of mobile devices overwhelmed the supply chain, security professionals and wireless networks. The summer witnessed the introduction of a series of amazing and revolutionary devices including the EVO 4G, Blackberry Torch, Droid X, iPhone 4. Consumer euphoria about the new devices led to a surge in demand that managed to overcome a seemingly unrecoverable period of recession. However, the handset manufacturers and wireless carriers which introduced the products had hoped for even greater success. A series of security blunders, supply chain snafus and regulatory entanglements, battered brands and constrained what might have otherwise been even higher sales results.
Last week’s decision by AT&T Wireless to suspend iPhone pre-orders is a big mistake in my opinion. Both Apple and AT&T already have significantly underestimated demand for the new device, which is not surprising given that the iPhone4 is arguably the biggest product launch in history. But by cancelling pre-orders they are introducing further entropy into the supply chain. Data from online e-commerce functions such as pre-order can analyzed to identify overall consumer demand patterns useful for supply chain forecasting. Without these pre-order signals, AT&T, Apple, Foxconn and others have far less information upon which to base forecasts for Thursday’s retail launch date.
One week ago, Apple’s new iPhone 4 became available for pre-order unleashing chaos in the mobile phone supply chain. Demand for the new device was ten times higher than expected resulting in a series of order management and inventory challenges for AT&T, Apple and its partners. Over 13M AT&T subscribers visited the company’s web site on the first day to assess whether they were eligible for an upgrade. In an official statement, Apple stated that on June 16th that