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Thursday, August 18, 2011, 06:20 am PT (09:20 am ET)

$1B Apple-Sharp deal more likely LCD prepayment than plant investment

Contrary to recent reports that Apple would invest $1 billion in an LCD manufacturing plant from Sharp, industry insiders believe it's more likely that Apple is simply making an advance payment to secure display components.

Citing sources in the Taiwan supply chain, DigiTimes reported on Thursday that Apple more likely made a deal with Sharp for panel purchases, rather than actually investing in the Japanese company. Insiders said given the business relationship Apple has had with another display maker, LG, it's unlikely Apple would invest $1 billion in a facility.

Regardless, "tighter collaboration" between Apple and Sharp means Apple will become less reliant on its rival and chief supplier, Samsung. Despite the fact that Apple buys a great deal of components from Samsung, the two companies are engaged in a bitter legal battle with multiple lawsuits spanning across the globe.

Another company that may feel the squeeze from an Apple-Sharp deal is CMI. The company recently began supplying IPS panels for the iPad 2, but closer ties between Apple and Sharp could hurt orders for the company.

Earlier this week, rumors were reiterated that Apple plans to invest $1 billion in a Sharp factory that would build screens for its iPhone and iPad products. Such a move was said to ensure stable supply of LCD displays.

Apple's moves with display suppliers are believed to be tied to recent issues with components from LG. A report earlier this month claimed that LG Display lost its status as the leading iPad 2 display maker after LCD shipments were allegedly plagued by quality issues.

Sharp


Following the problems, Apple shifted more of its orders to Samsung and new partner CMI. CMI reportedly hopes to become a regular supplier for Apple, and is ramping up production of 9.7-inch iPad displays. It now has a monthly output of about a million units.

"But CMI still needs to stabilize the quality of its IPS panels and enlarge production capacity in order to stand a chance of winning more orders from Apple," Thursday's report said.