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Tuesday, July 20, 2010, 01:00 pm PT (04:00 pm ET)

iSuppli: Apple's iPad the "Tickle Me Elmo" of 2010, boosts forecast

Market analysts at iSuppli have revised their iPad sales forecasts for 2010 from 7.1 million units to 12.9 million, writing that "product demand [is] expected to vastly exceed available supply" and calling the new mobile computing appliance "the 'Tickle Me Elmo' of the 2010 holiday season."

In response to signs that Apple is increasing iPad component production to meet surging demand, the group revised its earlier forecast set in early April. iSuppli expects iPad sales to continue increase rapidly, reaching 36.5 million units next year and hitting 50.4 million in 2012.

Rhoda Alexander, director of monitor research for iSuppli, wrote in a report, “Apple has hiked its iPad manufacturing goals to suppliers across Asia. As iSuppli stated in its initial forecast, the key to continuing success will be how quickly Apple responds to issues as they arise and whether the company can align suppliers to meet demand needs. Apple’s acceleration of its component demand indicates that the company has raised its iPad production target for 2010. Our latest research indicates there is much higher production than previously expected for two key components: LCD panels and NAND flash."

Alexander said iSuppli "believes that the only limitation on iPad sales now is production—and not demand," and noted that "Apple has taken a very controlled approach introducing this product to new markets, with manufacturing limitations likely being the major inhibitor on how quickly iPad sales expand."

Adding new manufacturing capacity for iPad displays is critical to meeting demand, and the expanding market is resulting in incrementally better manufacturing yields, although current production is still reportedly "well below a desirable level of 90 percent" according to the group.

"Apple could further increase its 2010 production goals, but it risks sacrificing some quality control in that effort," the groups research states. "At present, iSuppli estimates Apple will stay close to the existing production targets, leaving room for further expansion in 2011."

The report said that "with nearly 84 percent share in 2010, Apple’s iPad virtually owns the market, and the device is expected to dominate at least through 2012." Apple is expected to revamp its iPad offerings next year, which may include giving it an iPhone 4 style camera and possibly an expansion of screen size options.

iSuppli added that "much of the competition delayed launching rival offerings following the iPad debut to allow time to reconfigure products," noting that Acer and Asus are planning to release tablets at the end of the year, joining existing tablet products that haven't seen much success yet, including hardware from Dell, JooJoo (CrunchPad) and WePad. HP is expected to release its own iPad competitor under the moniker PalmPad, but that isn't anticipated to happen until next year.

"To be sure," iSupply noted, "the major challenge for Apple competitors will revolve less around hardware but relate more to the suite of applications that can be paired with the hardware. Just like the iPhone, the rest of the market is feverishly playing catch-up to the iPad at this point."