January 29, 2010

Analysts Expect iPad to Give lift to Asian Suppliers

Filed under: Uncategorized — ktetaichinh @ 3:27 am
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Apple Inc.’s iPad device may significantly increase demand for components such as touch screens and memory chips, especially if it succeeds in creating a new product category and spawning competitors, according to industry analysts.


Analysts say that would be a boon to Asian suppliers, including display makers such as LG Display Co.; chip makers such as Samsung Electronics Co. and Toshiba Corp.; touch-screen makers Wintek Corp. and Sintek Photronic Corp.; and assemblers such as Hon Hai Precision Industry Co., which uses the trade name Foxconn. Shares of these companies all rose Thursday in Asia.

Apple hasn’t identified its iPad suppliers and an Apple spokeswoman declined to comment.

Like many technology brands, Apple doesn’t actually manufacture most of its products. It hires manufacturing specialists—mainly Taiwanese companies that have extensive operations in China—to assemble its gadgets based on Apple’s designs. They, in turn, use parts from large and small manufacturers many in Taiwan, Japan and Korea.

The iPod and iPhone devices have already been a boon to component manufacturers in Asia, and many are hoping for a repeat performance.

The true component mix won’t be known until Apple begins shipping the device and third-party analysts can disassemble it to see what’s inside. However, analysts keep their own list of likely suppliers.

“NAND flash memory chip makers such as Samsung, Toshiba, and Intel Corp. and Micron Corp.’s joint venture will likely see more demand since the device carries up to 64 gigabytes of storage,” said Nam Hyung Kim, director of equity research at Arete. “This will be a good year for the memory-chip suppliers thanks to Apple and the rush by competitors to match Apple-like products.”

Wanli Wang, an analyst at HSBC Securities, expects iPad shipments to be between 3 million and 10 million this year. “But given iPad’s competitive pricing, we expect Apple to be able to ship up to the higher end of that range,” the analyst said.

The iPad will be sold in various models that cost between US$499 and US$829, Apple said Wednesday.

According to a person familiar with the matter, LG Display has received a large volume order for displays used in the iPad. Shares in LG Display rose 4.7% to 40,300 won (US$34.44), outperforming the broader Kospi index, which rose 1%.

It is common practice for a company like Apple to buy the same component from multiple suppliers, but the person, who declined to be named, said LG is the main supplier of displays for the iPad and Apple “may not have many other vendors.”

LG Display has already seen a sharp increase in its earnings in the fourth quarter and analysts say its earnings outlook for this year remains bright.

Analysts say a possible secondary source for the display panels is Taiwan-based manufacturer Innolux Display Corp., an affiliate of Hon Hai. Innolux officials couldn’t immediately be reached for comment. The company’s shares rose 6.3% to 53.70 New Taiwan dollars (US$1.68).

The touch-screen technology on the phones will likely be supplied by Taiwanese companies Wintek and Sintek, analysts said. Wintek spokesman James Chen declined to comment on the company’s customers, but said the company would begin shipping midsize panels of the kind used in the iPad this year. Sintek officials couldn’t be reached.

Charlie Lu, an analyst at Macquarie Securities, said he expects tablet computers to account for 10% of Wintek’s revenue this year, the vast majority of that from iPad sales, assuming shipments of five million iPads this year. Wintek also makes touch screens for the iPhone, and Apple products make up about 30% of its revenue, Mr. Lu added.

The effect on Sintek will likely be less dramatic since touch-screens make up less of its business, Mr. Lu said. Shares of Wintek and Sintek rose 1.1% and 1.2%, respectively.

One attention-grabbing aspect of the iPad is the fact that it is made with an internally designed microprocessor, a departure from Apple’s usual use of external semiconductor designs.

The iPad’s memory chips will be NAND flash memory, a type of chip widely used in phones, including the iPhone, and digital cameras. Samsung and Toshiba are the world’s two biggest NAND flash suppliers by revenue, and are likely to be iPad suppliers.

A Samsung spokeswoman declined to comment, while a Toshiba representative couldn’t immediately be reached. Samsung shares rose 1% to 808,000 won, while Toshiba shares rose 3% to 512 yen ($5.69).

Analysts said the iPad’s casing is likely to be made by Taiwan’s AVY Precision Technology Inc., which manufactures aluminum alloy and plastic die casting products. The company declined to comment.

Hon Hai, known to be secretive about its customers, declined to comment, but it is known in the industry to be a longtime assembler of Apple products. Hon Hai shares rose 2.3% to NT$136.

Ting-I Tsai
contributed to this article.


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