DigiTimes reports that Apple’s intention of shipping 40 million iPads in 2011 has resulted in the Cupertino-based company snatching up 60% of the world’s touch panel displays for 2011. As a result, Apple’s competitors are struggling to acquire supply and that shipment volumes may consequentially lag behind orders.
Touch panels are currently suffering the most serious shortage due to Apple holding control over the capacity of major touch panel makers such as Wintek and TPK, and with US-based RIM, Motorola and Hewlett-Packard (HP) also competing for related components, second-tier players are already out of the game, the sources noted.
“Sources from iPad distributors pointed out that in 2010, Apple’s order forecasts to its OEM partners were all high and the biggest problem on the supply side was not capacity, but low yields of touch panels,” the report explained. “In 2011, Apple’s strategy of taking up most of the capacity should help the company quickly expand its sales, while reducing its competitors’ shipment growth.”
During Apple’s earnings conference call in January, Apple COO Tim Cook revealed that the company had made a $3.9 billion pre-payment for long-term component parts that Cook refused to specify.
On the operational side of the house, as you probably remember, we’ve historically entered into certain agreements with different people to secure supply and other benefits. The largest one in the recent past has been, we signed a deal with several flash [memory] suppliers back in the end of 2005 that totaled over a billion dollars, because we anticipated that flash would become increasingly important across our entire product line and increasingly important to the industry. And so we wanted to secure supply for our company. We think that was an absolutely fantastic use of Apple’s cash, and we constantly look for more of these. And so in the past several quarters, we’ve identified another area and come to some recent agreements that Peter talked about in his opening comments. These payments consist of both pre-payments and capital for process equipment and tooling. And similar to the flash agreement, they’re focused in an area that we feel is very strategic. And so I’d prefer not to go into more detail about what specific area it’s in, but it’s the same kind of thinking that led us to those deals.
Nevertheless, it’s widely believed that the order was for LCD displays for upcoming iPad and iPhone production. Remember, over the past few months there have been credible reports detailing Apple’s plans to help companies like Toshiba and Sharp construct factories for upcoming LCD panel manufacturing.