infoTECH Feature

February 02, 2011

Apple Invests Billions to Secure LCD Panel Supply

With the rising popularity of smartphones and tablets, small and medium-sized liquid crystal display (LCD) panels have become crucial user interfaces. Hence, the demand for these panels is growing rapidly.

Consequently, Apple, Inc., is investing billions of dollars to guarantee availability of advanced LCD panels for its iPads and iPhones. In fact, at the recent first-quarter financial announcement, Apple’s (News - Alert) chief operating officer Tim Cook stated that the company had executed long-term supply agreements with three vendors. These agreements were expected to involve about $3.9 billion in inventory component prepayments and capital expenditures during a two-year period.

Based on an analysis of Apple’s existing supplier relations, intellectual property ownership and licensing and technology, market research firm IHS iSuppli believes the vendors in question may be LG Display, Sharp (News - Alert) Corp., and Toshiba Mobile Display. The agreements would involve the supply of Apple’s retina display, used in the iPhone and iPad. The retina display employs the use of advanced in-plane switching (IPS) and low-temperature polysilicon (LTPS) technology that provides extremely high resolutions in small displays by using pixels that are smaller than the human eye can perceive.

“In the era of the iPad and iPhone, the user interface -- particularly the display and touch screen -- has become the most critical competitive differentiator for tablets and smart phones,” noted Vinita Jakhanwal, director for small and medium displays at IHS (News - Alert) iSuppli, in a statement. “With sales of smartphones booming, and a flood of new entrants into the tablet market this year, competition among original equipment manufacturers (OEMs) for available supplies of high-end small and medium displays has reached a fever pitch, straining availability of critical types of displays. Because of this, Apple has moved to invest some its enormous cash reserve in securing the supply of advanced displays,” added Jakhanwal.

Apple already expends vast quantities on displays. In 2010 alone, Apple spent nearly $2 billion on displays for its iPad and iPhone lines, sourcing LCD panels from LG Display, Samsung (News - Alert) Electronics, Sharp and Toshiba Mobile Display.

To be sure, the company’s move to invest in displays represents a major expansion of its activity in the area. By doing this, Apple should be able to lay claim to a major share of global output of IPS LCD and LTPS LCD panels, Jakhanwal noted.

Apple’s moves to corner the IPS and LTPS markets have major implications for all competitors participating in the smart phone and tablet market, according to IHS iSuppli.

“With Apple trying to invest in assuring IPS supply, and Samsung Electronics having preferential access to small- and medium-sized AMOLED supply, the rest of the smart phone makers are caught between the two giants,” asserted Jakhanwal. According to Jakhanwal, this has left other OEMs to resort to other technologies when it comes to advanced displays, giving Apple and Samsung a huge edge in product differentiation in a highly competitive market.

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Ashok Bindra is a veteran writer and editor with more than 25 years of editorial experience covering RF/wireless technologies, semiconductors and power electronics. To read more of his articles, please visit his columnist page.

Edited by Tammy Wolf
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