Sharp Seeking to Reduce Reliance on Apple, Regain Control of iPhone Display Plant

Friday July 11, 2014 11:55 AM PDT by Eric Slivka
gold_iphone_5s_topKey display supplier Sharp is reportedly seeking to reduce its reliance on Apple, with sources telling Nikkei the company has offered Apple 30 billion yen ($293 million) to purchase the equipment located in Sharp's Kameyama Plant No. 1 that currently churns out displays for the iPhone. Apple contributed roughly half of the 100 billion yen (~$1 billion) cost to convert the plant from large TV panels to small iPhone displays in 2012, with Apple owning the plant's equipment.
By taking a leadership role in running the plant, Sharp apparently seeks to diversify its customer base. Being able to supply panels to Chinese smartphone manufacturers, for example, would make Sharp less dependent on Apple. The U.S. technology giant is said to be demanding that the Japanese company not supply panels to Samsung, Apple's biggest smartphone rival.
According to the report, the plant is currently running at 90% capacity producing displays for the iPhone 6, giving Sharp some flexibility in the negotiations until demand from Apple starts to slow down with the natural cycle of iPhone production.

Apple typically sources its displays from several suppliers, and Apple's main iOS device assembly partner Foxconn has reportedly been looking to partner with Sharp to begin some of its own production of iPhone and iPad displays. It is unclear how willing Apple will be to give up the display equipment, but if it does provide Sharp with some more flexibility there are still a number of display partners that could help fill any void left by Sharp's diversification.

Reliance on Apple is major issue for many suppliers, both in terms of managing the cyclical nature of the business given Apple's product release patterns and the potential for major disruptions of the companies' revenue streams should Apple suddenly decide to change suppliers. As a result, it's a delicate balancing act for many companies happy to have Apple's business but looking for other opportunities to sustain themselves when Apple's demand wanes.

Related roundup: iPhone 6

Top Rated Comments

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Posted: 20 weeks ago
"Thanks for your investment allowing us to get this high-end plant up and running, Apple! But we'd rather use it to serve your competitors! Is that OK? Here, I found a nickel! You can have it!"
Rating: 17 Votes
Posted: 20 weeks ago
Wasn't Sharp on the brink of bankruptcy not long ago? This seems like a lousy way to thank Apple for helping them.
Rating: 8 Votes
Posted: 20 weeks ago
I like the other companies trying to spin their inability to use sapphire. I recall an article from maybe a year ago where saying that Apple was actively looking to use their cash hoard in ways that would allow them to create new products that competitors can't easily copy. This is a perfect example of that.
Rating: 7 Votes
Posted: 20 weeks ago

Apple will have made back the money invested from product revenues about 100 times over by now.


Yeah? So? They had a business advantage. They exercised that advantage. They found a willing partner. They're reaping the benefits of the investment. I say don't let Sharp out of the deal.
Rating: 5 Votes
Posted: 20 weeks ago

...company has offered Apple 30 billion yen ($293 million) to purchase the equipment located in Sharp's Kameyama Plant No. 1 that currently churns out displays for the iPhone. Apple contributed roughly half of the 100 billion yen (~$1 billion) cost to convert the plant from large TV panels to small iPhone displays in 2012, with Apple owning the plant's equipment.

I don't see why Apple would take this deal. Seems like a huge disadvantage to them... They didn't spend $500 million so they can get back less.
Rating: 4 Votes
Posted: 20 weeks ago

Apple will have made back the money invested from product revenues about 100 times over by now.


That's an entirely different matter.

Essentially Apple invested money into a company, that doesn't mean they received their LCD parts for free. Also Sharp making a portion of an Apple Product (and even then they don't make all of that portion) does NOT mean that they are the key to the success to those devices. Apple spent multiple millions of dollars to make the iOS devices a success and if Sharp didn't exist they would have just sourced the LCD part from someone else.

From my point of view this is an insult of a deal.

It's like if I asked you for 1000 bucks so that I could remodel my house... I remodeled my house and sold it for 1 million bucks. Then I made you an offer of repaying you $600 of the $1000 you gave me... does that sound fair to you?
Rating: 4 Votes
Posted: 20 weeks ago

According to the report, the plant is currently running at 90% capacity producing displays for the iPhone 6, giving Sharp some flexibility in the negotiations until demand from Apple starts to slow down with the natural cycle of iPhone production.


How does it being at 90% capacity give them leverage? If anything, Apple wouldn't be inclined because they are USING IT..

In fact, it would put Sharp at a disadvantage.. If it were sitting and not being used... then I could see Sharp walking up and telling Apple they'd take it over...
Rating: 3 Votes
Posted: 20 weeks ago
I would love to see Apple spread out its product release schedule, this would help suppliers as well.
Rating: 2 Votes
Posted: 20 weeks ago

My guess is Sharp would only propose such a deal if Apple were likely to take it.

And Apple would only be likely to take it if it was a good deal for them.

Maybe, this is equipment which would otherwise have to be written off at a much lower price in a few years' time.

Maybe it won't be used on the newer Apple models, but Sharp could use it for cheapo Chinese phones.

(...)


Exactly. We have no idea how much Apple has already gotten back in tax write-offs, how much the equipment is still worth, and so forth.

Heck, we don't even know for sure that Apple actually helped out with half of the original cost, as that percentage was speculation.

I hope after Apple recoups their investment they will dump Sharp. Let these companies "escape" to Samsung and see if their future is gonna be brighter :rolleyes:


Samsung and Qualcomm had already invested over two hundred million dollars in Sharp to keep them going, which probably helped Apple as well.
Rating: 2 Votes
Posted: 19 weeks ago

Please... you seriously think deals are made based on your *selling my house* analogy?

Do you even know what is involved in setting up the most advanced LCD panel factory in the planet?

Do you know even know under what circumstances Apple agreed to lend the money to Sharp?

Arm chair CEO's and CPA's sure are plenty around here.

Apple is the worst consumer to actually have and this is a popular sentiment amongst suppliers. They lowball the prices so much they are known as the Wal-Mart of component buyers.

So why the companies do business you say? Most of them look for profits in volume but some do it to barely stay afloat.


Your such a realist !!!! However, it does work well. :apple:
Rating: 1 Votes

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