(BN) Apple May Have IPad Screen Shortages Amid Production

[Dave Farber <dfarber () me com>]

Begin forwarded message:

> From: "CONNIE GUGLIELMO, BLOOMBERG/ NEWSROOM:" <cguglielmo1 () bloomberg net>
> Date: April 19, 2010 1:39:01 PM EDT
> To: dave () farber net
> Subject: (BN) Apple May Have IPad Screen Shortages Amid Production 

> fyi
>
> +------------------------------------------------------------------------------+
>
> Apple May Have IPad Screen Shortages Amid Production Challenges
> 2010-04-19 17:18:08.683 GMT
>
>
> By Connie Guglielmo and Arik Hesseldahl
>     April 19 (Bloomberg) -- Apple Inc., which delayed selling
> the iPad outside the U.S. because demand is outpacing supply,
> may be struggling to get enough of the touch screens used in the
> tablet computer, analysts said.
>     The display’s size could be a challenge to suppliers, who
> may be unable to make usable screens in the quantities Apple
> needs, said Andrew Rassweiler, an analyst at research firm
> ISuppli Corp. in El Segundo, California. The 9.7-inch (25-
> centimeter) screen, larger than that of the iPhone, is made by
> South Korea’s LG Display Co. and Samsung Electronics Co., and
> Japan’s Seiko Epson Corp., according to ISuppli.
>     “We understand that the yields on the display have been
> low and that they’re creating a production bottleneck,”
> Rassweiler said in an interview. “That they have been doing it
> for the iPhone for some time is great, but once you go to 9.7
> inches, it is a much more complicated process.”
>     Any constraints might delay Chief Executive Officer Steve
> Jobs’s attempts to conquer the tablet market before rivals such
> as Hewlett-Packard Co. and Dell Inc. start selling competing
> devices. Jobs is betting on the iPad to create a new business at
> Apple between the iPhone and Macintosh computer.
>     Apple declined to comment on questions regarding iPad
> manufacturing, said spokeswoman Natalie Kerris. She reiterated
> the company’s April 14 comments that “demand is far higher than
> we predicted and will likely continue to exceed our supply over
> the next several weeks.”
>
>                      International Delay
>
>     Chris Goodhart, a Samsung spokesman in San Jose,
> California, declined to comment. Anthony Moon, a spokesman for
> LG in Seoul, and representatives of Seiko didn’t respond to
> requests for comment.
>     Apple sold more than 500,000 iPads in the first week after
> its U.S. debut on April 3. Apple said it made the “difficult
> decision” to delay the international release of the iPad by a
> month because demand was greater than it predicted. That means
> the iPad -- a mobile gadget for surfing the Web, reading
> electronic books, playing music and watching videos -- won’t be
> available until the end of May in the U.K., Canada, Australia,
> France, Germany, Italy, Japan, Spain and Switzerland.
>     The iPad’s LED-backlit display is about 6 inches larger
> than the color screen used in Apple’s iPhone. For the iPad,
> Apple opted for a screen technology called IPS, or in-plane
> switching, that the company said provides “crisp, clear images
> and consistent color with an ultra-wide” viewing angle.
>     Apple doesn’t disclose which suppliers provide parts for
> the iPad or who manufactures it, though it has said most of its
> products -- including the iPhone, Mac and iPod media player --
> are made by partners in China.
>
>                          No Surprise?
>
>     “Scaling manufacturing of the iPad has been quite a
> challenge -- there are a number of key components that go into
> that device that have never before had to scale to mass-market
> production,” said Yair Reiner, an analyst at Oppenheimer & Co.
> in New York. “We shouldn’t be so surprised that some of those
> start to hit some glitches.”
>     Morgan Stanley also says the iPad overseas delay has to do
> with building up its manufacturing. The “biggest limitation”
> is producing enough touch-screen panels, though yields have
> improved, said Katy Huberty, an analyst in New York.
>     The London research firm Ovum expects Apple to ship 13
> million iPads by the end of next year.
>     “The iPad is based on a number of high-end components,
> including its Apple-designed A4 processor and 9.7-inch LCD
> screen, which will take Apple’s manufacturing partners time to
> produce in significant volumes,” said Tim Renowden, an analyst
> for Ovum.
>
>                       Priciest Component
>
>     Apple, based in Cupertino, California, fell $4.60 to
> $242.80 in Nasdaq Stock Market trading at 1:14 p.m. New York
> time. The shares have doubled in the past year.
>     A teardown analysis by ISuppli showed that the touch-
> sensitive, custom-manufactured glass screen is the iPad’s most
> expensive component. The display accounted for $95 of the
> $259.60 the firm estimated it costs Apple to build the device.
>     The screen’s special design makes it about twice as
> expensive as those used in netbook computers of similar size,
> according to Rassweiler.
>     Taiwan-based Wintek Corp. makes the glass overlay necessary
> to detect touches of users’ fingertips, and Broadcom Corp. and
> Texas Instruments Inc. provide chips used to help control the
> touch screen, ISuppli said.
>     Bill Blanning, a spokesman for Irvine, California-based
> Broadcom, and Kim Morgan at Dallas-based Texas Instruments
> didn’t return calls seeking comment. Wintek representatives
> didn’t respond to requests for comment.
>
>                         Previous Snags
>
>     Apple has run into manufacturing difficulties on some of
> its products before, including its MacBook notebooks and iMac
> desktops, said Shaw Wu, an analyst with Kaufman Bros. in San
> Francisco. The iPad screen is “expensive and difficult to
> produce,” and it’s not surprising that Apple might run into
> manufacturing snafus with the first iterations of a new product,
> he said.
>     “You don’t really know where your production snags are
> until they happen, so there’s a learning process that they’re
> going through right now,” Wu said. “They’ll be retooling and
> recalibrating their lines until they get it right.”
>
> For Related News and Information:
> Apple earnings: AAPL US <EQUITY> CH1 <GO>
> Apple earnings stories: AAPL US <EQUITY> TCNI ERN <GO>
> Apple revenue segments: AAPL US <EQUITY> PGEO <GO>
> For top technology stories: TTOP <GO>
>
> --Editors: Ville Heiskanen, Nick Turner
>
> To contact the reporters on this story:
> Connie Guglielmo in San Francisco at +1-415-617-7134 or
> cguglielmo1 () bloomberg net;
> Arik Hesseldahl in New York at +1-212-512-2371 or
> ahesseldahl () bloomberg net
>
> To contact the editor responsible for this story:
> Tom Giles at +1-415-617-7223 or tgiles5 () bloomberg net



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