Strong demand for the Apple iPad is squeezing LG Display’s
supply of screens, according to the manufacturer’s CEO, and could strain
inventory of the tablet device as it enters new markets.
“Demand keeps growing and we can’t meet it all. Apple may
have to delay launches of the iPad for some countries due to tight component
supplies and strong demand,” Kwon Young-soo, CEO
of LG Display, told
reporters from Reuters and other media outlets July 22. “We are considering
increasing production lines for iPad products but overall supply is likely to
remain tight until early next year.”
LG Display’s supply issues demonstrate how the marketplace
success of the iPad, in the months following its April release, has become a
double-edged sword for Apple and its suppliers: along with increased earnings,
both face enormous pressure to meet customer orders.
The iPad and other devices could lead Apple
to spend $16.2 billion on OEM semiconductors in 2011, according to recent
estimates by research firm iSuppli, enough to rank it second behind
Hewlett-Packard at $17.1 billion. Apple’s semiconductor spend for 2010 was
estimated at $12.4 billion, a growth rate of 54 percent; iSuppli calculated
that the company will need to increase spending by another 30.4 percent to
reach that 2011 target.
“An advancement in the rankings means that a company has
been successful in introducing new products and that it is allocating more
dollars in search and development—two factors that, incidentally, feed
innovativeness as well,” Min-Sun Moon, an analyst for iSuppli, wrote in a July
21 research note. “Apple’s expected rise to No. 2 … means
that the company’s investment in its new smartphone and tablet has paid off—and
will continue to do so for some time to come.”
For the third quarter of fiscal 2010, Apple reported sales
of 3.27 million iPads, along with 3.47 million Macs, 8.4 million iPhones, and
9.41 million iPods. That was enough to buoy the company’s revenues to $15.7
billion, with a net quarterly profit of $3.25 billion.
“We’re increasing [iPad] capacity as quickly as we can,” Tim
Cook, Apple’s chief operating officer, told analysts and media during a July 20
earnings call. However, he gave no indication of when that capacity would begin
to match demand for the iPad, which has been selling roughly 1 million units
per month.
Cook also suggested that the iPad could prove devastating to
Apple’s hardware rivals: “If it turns out that the iPad cannibalizes PCs that,
I think, [that] is fantastic for us because there is a lot of PCs to
cannibalize,” he said, adding: “It’s still a big market.”
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