IHS iSuppli research believes that amid the intense demand for limited supplies of small and medium displays utilized by smart phones and tablets, Apple is investing billions of dollars to guarantee availability of advanced liquid-crystal display (LCD) panels for its iPad and iPhone lines. iSupply believes the companies in question may be LG Display, Sharp 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.
Apple's activity in the LCD area was also commented by Piper Jaffray analyst Gene Munster. He claims that Apple's invsetments in LCD companies unveil the company's plans to move into the television business. He thinks the company will start selling TV as soon as the end of calendar year 2012.
Munster on Thursday, asserting in a research note that Apple "will enter the TV market with a full focus, as an all-in-one Apple television could move the needle when connected TVs proliferate."
"Based on our meetings in Asia in conjunction with recent media reports, we believe Apple is securing displays for future products. Apple has started to emphasize display technology in recent months and we expect this emphasis to continue with the second gen iPad, future iPhones and Macs, as well as a future Apple television."
Concludes Munster: "Recent developments in Apple's strategy, including the component deal we believe could secure up to 50" LCD displays, bolster our confidence that the company remains serious about the connected living room."
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 Electronics, Sharp and Toshiba Mobile Display.
IHS iSuppli researchers claim that rather than simply purchasing displays from suppliers, Apple may provide money that LG Display, Sharp and Toshiba Mobile Display can use to invest in the production of IPS and LTPS LCD panels.
By doing this, Apple should be able to lay claim to a major share of global output of IPS LCD and LTPS LCD panels, noted Vinita Jakhanwal, director for small and medium displays at IHS iSuppli.
He also identifies that Apple's moves to corner the IPS and LTPS markets would have major implications for all competitors participating in the smart phone and tablet market.
"Since IPS LCD production is limited to suppliers that own or have access to the IPS license, it is a challenge to match demand to suppliers that own production capacity and IPS licenses," IHS iSuppli said. "Furthermore, manufacturing yields associated with IPS LCD are still poor. For LTPS LCD, the established capacity base is limited and with the sudden growth in smart phone demand, may prove insufficient to meet market demand. The major alternative to IPS wide viewing and power saving features in smart phones currently is the active matrix organic light- emitting diode (AMOLED) display, used in many Android operating system-based models. At present, Samsung Mobile Displays and LG Display represent the only sources for AMOLED panels, with Samsung Mobile Displays accounting for the vast majority of shipments. Given this limited supply base, AMOLEDs have gone into a state of critical shortage."
"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," Jakhanwal said. "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."
Apple's capability to reshape the display chain springs from its massive cash reserves, the highest among any technology firm. Apple has built its tremendous war chest by selling high-margin, high-value-added hardware. As shown by the IHS iSuppli Teardown Analysis service, Apple commands hardware gross margins in the range of 50 percent on the iPhone, in comparison to 20 percent to 40 percent for competitive products.
In the past, Apple has used this vast resource to snap up supplies of NAND flash to guarantee sufficient volumes for its iPhone line.