Apple reportedly absorbing increased costs from supply disruption in JapanA new report out of the Far East alleges that Apple has agreed to absorb increased costs for upstream Japanese components in order to prevent shipping delays of the iPad 2.
Sources from upstream component makers told Taiwanese industry publication DigiTimes on Thursday that Apple had agreed to the arrangement.
According to the report, Apple will absorb all the additional costs arising from Japan-based component makers affected by a massive earthquake earlier this month, in exchange for "smooth shipments." As such, Apple's upstream component suppliers are expected to see minimal negative affects to profitability, sources said.
"However, for other tablet PC vendors, purchasing pressure will increase and if they are unable to absorb the extra costs, which will only give Apple more advantages in the market," the report noted.
Sources also claimed that monthly shipments of the iPad 2 will reach four million units in the second quarter. According to the report, upstream suppliers of anisotropic conductive films (ACF) and ITO materials have enough inventory to last until May, but may face shortages in June.
The DigiTimes report may be related to an earlier report that suggested Apple was "considering accepting price hikes" in order to secure sufficient supply of touch panels. It has been suggested that Apple makes use of 60 percent of the global supply chain touch panel capacity.
Analysts have differed over the immediate impact of the Japan quake and subsequent tsunami to Apple's supply chain. An early report by iSuppli disclosed five important components sourced from Japan for the iPad 2, including NAND flash, DRAM, an electric compass, touch screen overlay glass and the battery, "likely to be impacted" by logistical issues as a result of the disaster.
However, Gene Munster of Piper Jaffray voiced his opinion that any impact to iPad 2 supply would be "modest."
Earlier this week, The Wall Street Journal reported that Apple had contacted a Japanese supplier expressing concerns over a potential shortage of lithium ion batteries used in the company's iPods.
Apple's healthy cash reserves give it a clear advantage over its competitors. CEO Steve Jobs has said that the company's more than $50 billion in cash is reserved for "one or more strategic opportunities in the future."
In January, Apple COO Tim Cook revealed that the company had committed $3.9 billion to long term component supply contracts over the next two years. Analysts
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