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

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.

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Top Rated Comments

nagromme Avatar
129 months 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!"
Score: 17 Votes (Like | Disagree)
jayducharme Avatar
129 months ago
Wasn't Sharp on the brink of bankruptcy not long ago? This seems like a lousy way to thank Apple for helping them.
Score: 8 Votes (Like | Disagree)
brendu Avatar
129 months 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.
Score: 7 Votes (Like | Disagree)
rdlink Avatar
129 months 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.
Score: 5 Votes (Like | Disagree)
MrXiro Avatar
129 months 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?
Score: 4 Votes (Like | Disagree)
MrXiro Avatar
129 months 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.
Score: 4 Votes (Like | Disagree)