Salesman displays an Apple iPad
Jefferies & Co. said in its Wireless and Handsets weekly that tablet and smartphone sell-through has been strong at the start of the holiday shopping season. REUTERS

Despite the tablet market getting crowded by each day, the demand for iPad continues to surge and could see rush orders as early as next week, an analyst with Jefferies said.

Our checks indicate that the supply chain for the iPad has been prepped for rush orders as inventory levels are deemed too low by retailers. Finally, our checks indicate sell-through remains good, analyst Peter Misek wrote in a note to clients.

Hon Hai, which assembles products for large U.S. companies including Apple Inc., and Dell Inc., recently began production of about 10,000 iPads a day at its new plants in Chengdu in central China. The eventual annual maximum capacity at Chengdu is 40 million units a year. Meanwhile, Hon Hai's Senzhen plants can produce 30 million units per year, according to DigiTimes.

We think Hon Hai's production capacity is unlikely to be a bottleneck, Misek wrote.

Misek expects Apple to ship 40 million iPads in calendar 2011 with the key variables being demand, the timing of Android Honeycomb, and availability of Gorilla glass. Gorilla glass is a thin, flexible and very strong product invented by Corning Inc. and Apple is said to have deployed this Gorilla glass in its iPhone 4.

California-based Apple started selling iPads, a tablet computer positioned in a category between a smartphone and a laptop, in April and eventually became a runway hit. Apple sold 4.19 million iPads during the fourth quarter. Apple is even rumored to launch iPad 2 sometime next year.

Recently, a survey by research firm Nielsen found that iPad tops the kids' wish list for this holiday season. The survey, which was conducted among a group of 6-12 year olds, showed that 31 percent of kids plan to purchase an iPad for themselves in the next six months.

Seeing the new found craze for iPad, many tech players ranging from Samsung to Research In Motion have jumped in to the tablet computer market, with many of their devices being powered by Google's Android operating system.

Moreover, tablet computers are cannibalizing sales of laptops due to its instant internet connectivity and quicker boot time apart from performing many functions of a PC.

Koreas' Samsung has sold 600,000 units of the Galaxy Tab in its first month. In Korea, Samsung sold 30,000 Galaxy Tabs in the first week. But, iPad seems to challenge Samsung even in its home turf - Korea --. iPad is set to launch in Korea on Nov.30 and has already taken 60,000 pre-orders in less than a week, according to a report on Korea Herald.

We find it interesting that the iPad appears to be in higher demand on Samsung's home turf than the Galaxy Tab. Also, we find the strong overall demand for the Galaxy Tab, which does not run a tablet optimized version of Android, bodes well for our bullish 2011 tablet expectations, Misek added.