In wake of component shortages from Japan, Apple may agree to pay higher prices for parts
For Apple, paying a higher price for components would lower the firm's gross margins and could lower earnings which might have a negative effect on the stock price. On the other hand, running out of components would result in a complete shutdown of the assembly line which could result in a bigger hit to earnings and the stock price. Because of the heavy demand for the Apple iPad 2, before the earthquake and tsunami, Apple had locked up 60% of the world's supply of touchscreen panel components. However, Apple's contract manufacturer, Foxconn, counts on using parts brought in from Japan and is believed to have just 2 to 3 weeks of parts in inventory. If things do not improve in Japan in terms of transportation and shipping, Foxconn might have to stop producing Apple products. This is why it is vital for Apple to find new sources for the parts outside of Japan.
Even before the parts shortage, Apple had made things difficult for its competitors to get a secure supply of parts by spending $3.9 billion toward long term contracts believed to be for touchscreen panel components. But even if Apple now has to pay more to procure the parts, its competitors will not benefit as other vendors that supply the same parts to other tech firms will probably raise prices in line with whatever new figure Apple negotiates with its new suppliers.
1. PhoneLuver (Posts: 467; Member since: 05 Jul 2010)
last time I checked, Foxconn was a Taiwanese company producing parts in Shenzhen on Mainland China. But China, Japan, close enough! :-p
2. Apple_FUD (unregistered)
"Apple had locked up 60% of the world's supply of touchscreen panel components"
This is misinformation. Come on! Think about it for one second! Apple doesn't even sell 60% of the devices in the world with touchscreens--android smartphones alone outsell all iOS touch devices. What, they're just going to hoard them? They made huge investments over YEARS (notice the plural there) for touchscreens. They did NOT run out and tell every touchscreen manufacturer that they want 60% of their production capacity nor did they buy a mass quantity for this year alone--that's moronic!
Just because some moron "analyst" makes these idiotic statements, most likely to boost stock prices, doesn't mean they are remotely true. Can we please use our brains just a little and think before regurgitating such erroneous information?
3. iwebdroidberry7 (Posts: 230; Member since: 17 Jan 2011)
"Think about it for one second! Apple doesn't even sell 60% of the devices in the world with touchscreens--android smartphones alone outsell all iOS touch devices. What, they're just going to hoard them?"
Android does not outsell iPads, iPod touches, and iPhones combined. Apple already has like 70% of the tablet market so where are you pulling your data from?