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During Apple's Q1 2011 Financial Results conference call, Apple revealed that they had made long term commitments with three companies in the amount of $3.9 billion. When questioned about the exact component, Tim Cook declined to answer citing competitive reasons.

During the opening statements, however, Peter Oppenheimer revealed that the agreements began in the September and December quarters:
"During the September and December quarters, we executed long-term supply agreements with three vendors through which we expect to spend a total of approximately $3.9 billion in inventory component prepayment and capital expenditures over a two-year period. We made approximately $650 million in payments under these agreements in the December quarter, and anticipate making $1.05 billion in payments in the March quarter"
Looking back at the previous quarters, it seems to us that Apple is likely securing LCD supplies from various vendors for the years to come.


044443-applelcd.jpg


When the iPad originally launched, the supplies were initially constrained specifically due to limited production of its LCD displays. Apple's supplier for the original iPad's display was LG. In July, LG's CEO Kwon Young-soo told reporters that they were simply unable to meet the production demands for the iPad:
"Demand (from Apple) keeps growing and we can't meet it all. Apple may have to delay launches of the iPad for some countries due to tight component supplies and strong demand. We are considering increasing production lines for iPad products but overall supply is likely to remain tight until early next year."
That experience alone would likely have incentivized Apple to explore more reliable supplies of LCD displays for their growing iOS portfolio.

In December, we heard two separate reports that Apple was investing $1.2 billion with Toshiba and Sharp separately. The rapid-fire sequence of the reports made us question that one might have been a mistake, especially since Toshiba actively denied the claim. But, in retrospect, one or even both of the reports seem to have been true. The Sharp rumor reported that Sharp would be spending 100 billion yen ($1.2 billion) to build production lines for "small to midsize LCDs, with Apple Inc slated to purchase bulk of the output for its iPhone". While the iPhone might be a target for the small LCDs, the reports description of "midsize" LCDs seems more appropriate for the iPad.

Apple was said to be shouldering the bulk of the investment and will buy up most of the panels that Sharp produces. The factory would not begin production, however, until 2012. Meanwhile, the Toshiba plant was rumored to be ready for production in late 2011.

Meanwhile, Hon Hai / Foxconn is said to be considering a $1.2 billion investment in Hitachi's LCD arm to build a new factory in Japan that will begin operating in 2012. While Apple is not known to be involved in this deal specifically, Foxconn is one of the biggest manufacturers of the Apple iPhone and iPad and is expected to start supplying LCDs for Apple's iPad in 2011 through its Chimei Innolux subsidiary. Interestingly, despite Toshiba's previous denials, this news report says that Toshiba is indeed building a new LCD plant in 2011 which is set to supply Apple.

The latest reports peg Apple's 2011 iPad display orders at 65 million units (up from 15 million in 2010), showing that Apple will need an enormous supply of displays as the iPad's market continues to grow. It also suggests that Sharp and Toshiba may have been two of the three target companies for Apple's massive $3.9 billion long term investment.

Article Link: Apple's $3.9 Billion Investment Was in LCD Displays?
 
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What I don't get is since Apple has so much cash in bank. Why don't they just build their own plants to produce LCD's? It seems they have enough demand for their own products to build manufacturing plants. So why have some other company do it when they could build the displays themselves and not pay a markup?

Edit: Or better yet buy a plant currently building displays for Android devices. Suddenly cut them off and ship the screens to Cupertino for iPhones and iPads.;)
 
Displays certainly seem to be the popular speculation in most places.

Random thought - how about SSD's. If the MacBook Air is the future of MacBooks then they will be buying a lot of SSD's in the future too.
 
I immediately thought iDevice screens when Oppenheimer mentioned it. They made it very difficult for competitors when the locked up huge supplies of flash memory and now will do the same with displays.

Sounds like no 'retina' iPad this year?


For anyone to believe Apple will be releasing a "retina" display on the iPad2 is ludicrous.
 
What I don't get is since Apple has so much cash in bank. Why don't they just build their own plants to produce LCD's? It seems they have enough demand for their own products to build manufacturing plants. So why have some other company do it when they could build the displays themselves and not pay a markup?

That's like asking you why you bother buying milk when you could just raise a cow and get all the milk you wanted without paying the markup.

You can't just "build a manufacturing plant" and expect it to spit out LCDs. Who is going to run them? Who has the expertise to make LCDs?

Edit: Or better yet buy a plant currently building displays for Android devices. Suddenly cut them off and ship the screens to Cupertino for iPhones and iPads.

I think that's what they just did. :)

arn
 
I hope part of the investment interested also the Imac displays! Maybe in the next gen of Imac we'll have more reliable screens without yellow tinge, black spots and backlight bleeding... :rolleyes:
 
What I don't get is since Apple has so much cash in bank. Why don't they just build their own plants to produce LCD's? It seems they have enough demand for their own products to build manufacturing plants. So why have some other company do it when they could build the displays themselves and not pay a markup?

Several possible reasons:

1.) it's just not worth it. Building this kind of plant is expensive and involves expertise that Apple doesn't have. To spend all that time money and energy in the hopes of shaving a few dollars off each LCD isn't worth the investment.

2.) Apple doesn't want to be in the LCD business. Building your own plant to fill your own needs seems like a good thought, but since needs change it is going to require lots of additional investment over the years to keep up with the technology and stay competitive with other LCD makers. To make that pay off, it would probably be better to try and run a profit from the factory, which means to sell LCDs to other companies. Sounds like a mess.

3.) They have a better idea of what to do with the money.
 
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What I don't get is since Apple has so much cash in bank. Why don't they just build their own plants to produce LCD's? It seems they have enough demand for their own products to build manufacturing plants. So why have some other company do it when they could build the displays themselves and not pay a markup?

Edit: Or better yet buy a plant currently building displays for Android devices. Suddenly cut them off and ship the screens to Cupertino for iPhones and iPads.;)


Serious?
 
I don't know much, but doesn't 65 million units up from 15 million units in 2010 seem a little far fetched? Is this really probable?
 
What I don't get is since Apple has so much cash in bank. Why don't they just build their own plants to produce LCD's? It seems they have enough demand for their own products to build manufacturing plants. So why have some other company do it when they could build the displays themselves and not pay a markup?

Edit: Or better yet buy a plant currently building displays for Android devices. Suddenly cut them off and ship the screens to Cupertino for iPhones and iPads.;)

1. Building a plant to produce LCD screens is quite difficult if you have no experience building LCD screens. Toshiba and others have tons of engineers who spent many many years building better and better LCD screens. Apple doesn't. And these people don't grow on trees.

2. No Android manufacturer would buy LCD screens from Apple without a watertight contract that guarantees the deliveries they want. Same as Apple will have watertight contracts with its suppliers. If Apple stopped deliveries, any manufacturer hit by this would make more money by suing Apple for damages than they would make selling the devices.
 
sensible business move on aapl's part to secure this supply chain - similar to the ram deal several years ago
 
Seems reasonable to me. They needed increased supply capacity because they couldn't meet demand with LG alone. Plus it looks like they've allocated money for R&D as well. Win, win all around.
 
What I don't get is since Apple has so much cash in bank. Why don't they just build their own plants to produce LCD's? It seems they have enough demand for their own products to build manufacturing plants. So why have some other company do it when they could build the displays themselves and not pay a markup?

Edit: Or better yet buy a plant currently building displays for Android devices. Suddenly cut them off and ship the screens to Cupertino for iPhones and iPads.;)

They don't want to be known as a company that has a manufacturing plant/city in China that pays workers $5 a day. Leave that to Foxconn.

If they could bring it to the US that would be a different story, but I doubt that would ever happen at the current price points.
 
Apple definitely putting money into screen deals.
No one's really mentioned the possibility they're also making deals for SSDs? Seems likely - basically they could do deals for lots of components (battery tech, SSD, Flash memory, DDR3, displays (from iMac/HDTV size down to iPhone to nano).
If they did do a deal or two:
- the companies wouldn't really confirm it
- Apple likely to buy out entire runs of the product/1st dibs/exclusivity deals

So basically they could push a screen that hadn't been out on market - it'd just arrive, as being shipped in millions of... iphones/iPads etc.

Apple could output video, apps etc regardless of the screen size - get apps to be capable of being resolution independent by allowing/forcing them to basically go the 2x res, then downscale for iPad/iPad2.
 
What I don't get is since Apple has so much cash in bank. Why don't they just build their own plants to produce LCD's? It seems they have enough demand for their own products to build manufacturing plants. So why have some other company do it when they could build the displays themselves and not pay a markup?

If Apple manufactured their own, that means they would be unavoidably accountable for 'poor working conditions, toxic fumes causing workers to fall ill and noxious waste':

http://www.techradar.com/news/world-of-tech/apple-slammed-by-environmental-activists-922747
 
The only argument against SSDs is i'm not sure how constrained SSDs are.

Also, the growth of SSDs and Mac sales aren't nearly as rapid as iPads and iPhones. Apple sold ~4 million Macs last quarter. Notebooks probably 60% of that. And of those, the number with SSDs a much smaller percentage.

iPads sold 7.3 million. And it just came out. The growth trajectory is huge. so it's a supply that they need to be able to keep up with.

arn
 
Sounds like no 'retina' iPad this year?

That's the conclusion I get from the article too.

Prior to a few weeks ago I felt the rumor of a 2048x1536 (e.g. four times the pixel count) iPad was plain and simple wishful thinking. However, in the last week, we've seen rumors that amount to "it's coming": the four-times resolution graphics resources found in some apps, the rumor of new GPU's that are four times more powerful, and now this rumor about huge investments in LCD production technology. Also, I read a previous rumor that stated that "retina" iPad prototypes already exist and are being tested at Apple HQ.

So even if it's far-fetched for an iPad 2 release this spring, with new LCD production facilities ramping up for a 2012 timeframe, that seems to coincide with the timing for perhaps an iPad 3 with the "retina" display.
 
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