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With 60% of world's touch panel capacity, Apple squeezes competitors


Apple has reportedly locked up 60 percent of the world's touch panel capacity, which has led to "tight supply" among competitors hoping to take on the iPad.

According to DigiTimes, Apple is expected to cause an industry-wide component shortage in 2011, which is causing issues among tablet PC makers. The most serious shortage has reportedly occurred with touch panels, as Apple holds the majority of capacity from major suppliers Wintek and TPK.

Major companies Research in Motion, Motorola and Hewlett-Packard are said to be competing for related components with Apple, pushing "second-tier players" out of the market entirely. Specifically, glass capacitive touch panels, like the one found on the iPad, are the most constrained component.

"Sources from iPad distributors pointed out that in 2010, Apple's order forecasts to its OEM partners were all high and the biggest problem on the supply side was not capacity, but low yields of touch panels," the report said. "In 2011, Apple's strategy of taking up most of the capacity should help the company quickly expand its sales, while reducing its competitors' shipment growth."

Apple Chief Operating Officer Tim Cook revealed in January that his company committed $3.9 billion to secret long-term component contracts. The company would not reveal what the money was put toward, citing a competitive disadvantage in doing so, but it has been widely speculated that the money has been put toward LCD screens and touch panels for devices like the iPhone and iPad.

Analyst Katy Huberty of Morgan Stanley said the investment could allow Apple to buy 60 million iPad touch panels, or 136 million touch displays for the iPhone.

Apple's secret investment is similar to 2005, when the company prepaid for NAND flash memory, allowing it to leverage pricing and garner supply for devices like the iPhone, iPad and new MacBook Air. Much like the anticipated control over the touch panel market in 2011, at numerous points in the past Apple caused a shortage of NAND flash, leaving competitors out while products like the iPhone dominated components.