Apple Inc. (AAPL) is shifting production of iPhone and iPad displays to Sharp (6753) Corp. in Japan and may introduce a television with screens from the same partner as early as the middle of 2012, Jefferies & Co. said.
Apple is moving its business to Sharp in Japan largely at the expense of Samsung Electronics Co., a growing rival in smartphones and tablets, said Peter Misek, a New York-based analyst at Jefferies. He wrote the research note based on a visit to Japan and conversations with manufacturing executives.
“It’s a huge deal for Sharp because they spent significant amounts of capital to try and expand capacity and upgrade their facilities,” Misek said in an interview. “It gives Apple a partner that they can control manufacturing and secure supply at a lower price.”
Television manufacturers, including Samsung (005930), are scrambling to figure out what Apple’s TV will look like and do, Misek said. He said Apple will take a production line at Sharp’s Sakai facility to make a modified version of what are known as amorphous TFT displays and will likely begin commercial production of what he called iTV in February.
Rival TV makers are likely at least 6 to 12 months behind, Misek said. Many lack the software and cloud-computing expertise to compete with Cupertino, California-based Apple, he said.
Apple has purchased between $500 million and $1 billion in equipment for manufacturing and has taken exclusive hold of one Sharp facility, for iPhone and iPad displays, he said.
Apple fell 2.5 percent to $366.99 on the Nasdaq Stock Market yesterday and gained 14 percent this year. Sharp was unchanged at 772 yen at 10:14 a.m. in Tokyo while Samsung rose 0.2 percent to 937,000 won in Seoul.
Apple’s relationship with Samsung is deteriorating, Misek said. Besides diversifying away from Samsung for displays, Apple has shifted some purchases of flash memory from Samsung to Toshiba Corp. (6502), he said. The deal with Sharp gives Apple more control over manufacturing.
“Apple likes to go right to the factory floor, redesign the process, monitor it,” Misek said. “Except with Sharp it looks like they’re taking that one step further where they will actually own the intellectual property and physically own the equipment.”
Apple is boosting spending to buy equipment and materials, becoming more involved in the manufacturing process, said David Eiswert, manager of the Baltimore-based T. Rowe Price Global Technology Fund.
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