How many Nexus 7 units have Google & Asus sold so far and how many do they expect to sell this year? Those are the questions everyone wants an answer to and I'm going to attempt to do just that. Digitimes recently reported that suppliers will be shipping 4 million touch (OGS) panels for the Nexus 7 in Q3 2012. Based on this, and some other data we already have, we can make an educated estimate of the Nexus 7's sales volume.
Q3 2011 Production & Sales
Production Volume
From the Digitimes report above, TPK Holding & Wintek are the suppliers for the Nexus 7's OGS panels. The two companies shipped one million units in June and 1.4 million units in July. Including the 1.4 million units in July, they have received orders for 4 million panels in Q3 2012. These figures should be equal to the number of Nexus 7 units going into production in each of those months/quarters. We also know that the initial shipment volume delivered to Google was 600,000 units in June. We also know that Google had initially estimated sales of 3 million units by the end of the year. This means that after looking at initial demand, Google & Asus may have roughly doubled their estimates and cranked up the production volume.
Using these figures with Little's Law gives us a cycle time of 2.5 weeks, i.e. it takes 2.5 weeks to produce and deliver a Nexus 7 unit to Google. Since monthly production volume stays at roughly 1-1.5 million units, production capacity is unlikely to be a constraint. Therefore, we can assume a constant cycle time and calculate the total Nexus 7 orders delivered to Google at the end of each month.
Sales Estimate
Once we have the Nexus 7 units available with Google, all we need to do is calculate the initial "sell-through rate" to get an estimate Nexus 7 sales so far. The Nexus 7 went up for sale in mid-July and the 16GB units were sold out in a week and we heard initial reports of sell outs of the 8GB version in 3 weeks. Since we know the size of the first production batch was one million units, it is a reasonable estimate for sales volume at that time to be the same. Also, since we know that Google had ordered more 8GB units (as compared to 16GB units) the "sell-through rate" would be about 2-3 weeks. In order to normalize the sell-through rate for demand fluctuations throughout the year, we can assume a conservative sell-through rate of 4 weeks throughout the forecast period, i.e. any batch of Nexus 7 units delivered to Google take about 4 weeks to be sold (either online or to stores).
Based on this, we can derive the following sales estimate for Q3 2012:
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