Apple could be on the verge of making touch panel supply much more scarce than it already is for the portable device market in the wake of Japan’s crisis. A new DigiTimes report Wednesday (via AppleInsider) says Apple is in talks with Taiwanese touch panel component manufacturers, and the Mac-maker is willing to pay more to secure “sufficient supply” for its products.
Touch panel capacity is reportedly limited following the earthquake and tsunami in Japan nearly two weeks ago. Foxconn, the company that makes many of Apple’s touchscreen products in China, is said to have two to three weeks worth of parts stockpiled, but it could face a shortage after that if the situation in Japan does not improve, which could lead to a production freeze. That’s something Apple wants to avoid at all costs, given the continuing success of its iPad 2, and the impending international launch of that device this Friday.
If the report is true, Apple could be paying quite a bit more for touch panels, which would hit gross margins. But the added expense would likely pay off in at least two ways. First, Apple could continue to meet (or at least come close to meeting) customer demand. Lines are good for Apple, so long as the people standing in those lines actually have a reasonable chance to get their hands on a device. Total stockouts would result in disappointment, not demand.
The second way Apple could benefit from buying up an even larger percentage of constrained stock is by reducing the availability of those same components for its closest competitors. iPad competition is heating up, with manufacturers like RIM putting firm dates and prices on their own tablet offerings. If a little extra spending on Apple’s part can generally raise prices for competitor products, and maybe even affect the ability of those competitors to bring products to market in a timely fashion, it will only help the iPad’s market position.
Apple is known for its component hedging, so it wouldn’t be surprising to see the company take that philosophy a step further in order to protect itself in a time of supply chain instability. Watch for signs of whether or not this strategy pays off in the coming weeks as the iPad 2 rolls out to more countries and competitors try to bring their products to market.