John Paczkowski

Recent Posts by John Paczkowski

Apple's Touch-Panel Appetite Leaves Little for Rivals

Apple is to the touch-panel business what Starbucks is to the coffee business–a market maker and mover. Particularly a mover. To wit: Claims today that Apple’s voracious appetite for the component is expected to cause an industrywide shortage this year.

According to Taiwanese trade mag DigiTimes, Apple has locked up nearly 60 percent of the world’s touch-panel capacity, leaving behind a very tight supply for its rivals to scrap over.

“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 also competing for related components,” says DigiTimes. “Second-tier players are already out of the game.”

So Apple ends up with a double advantage–not only has it secured supply enough for its own needs, but it has also caused scarcity in the market and disadvantaged its rivals. It’s impossible to say definitively, but my guess is this is the result of that mysterious $3.9 billion component supply investment COO Tim Cook mentioned during Apple’s first-quarter earnings call.

“We’ve historically entered into certain agreements with different people to secure supply and other benefits. And the largest one in the recent past has been we signed a deal with several flash suppliers back at the end of 2005 that totaled over $1 billion 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 the company, and we think that, 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 [CFO Peter Oppenheimer] talked about in his opening comments, in that these payments consist of prepayments and capital for process equipment and tooling. And similar to the flash agreements, they’re focused in that area we feel is very strategic.”

Indeed. Funny how Apple now controls–largely—both the demand and supply sides of the touch panel business.


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