Tablet computers are hot; there’s no dispute about that. Apple’s iPad has proven enormously popular, and consequently, it seems that tablets were on-display everywhere at the Consumer Electronics Show held earlier this month. As reported in IndustryWeek previously, the tablet wars have begun, with everybody under the sun producing tablets, says Endpoint Technologies Associates analyst Roger Kay.
iSuppli forecast last year that despite the arrival of the first real iPad competitors in 2011, Apple will still maintain a 70 percent share of shipments. Given its headstart on the market and growing demand for its iPad, I’m not surprised that Apple is pegged by iSuppli to continue its market dominance through 2012. Indeed, the research firm forecasts that iPad sales will account for just over 60 percent of global tablet shipments in 2012. But some new designs were introduced last year by Apple competitors, and companies such as BlackBerry, Motorola, Notion Ink and Dell all have plans to unveil additional models in coming months. With all that in mind, it would seem business looks pretty good, right? Actually, that may not prove to be the case.
A recent Businessweek article reports that whether or not a company can obtain sufficient quantities of display components for their tablets may well be a significant factor in determining how successful they can become. Apple’s fast start last year and the quickly growing demand for its iPad caused LCD display shortages for Apple’s supplier LG, which had a difficult time keeping up with demand. As Apple’s iPad continues to sell well, an iPad 2 is in the pipeline, and other companies rush tablets to market, it certainly seems reasonable to expect that another display component shortage may be on the horizon.
What I’m interested in, however, is Apple’s work with its supply chain partners to prepare for the possibility. The company has plans—or is making plans—to secure its anticipated quantities of displays. Competitors undoubtedly are making similar plans, but since they have come to the party later than Apple, one has to wonder if they will be able to secure the number of displays they anticipate needing. It is, after all, difficult to match Apple’s recent experience with the electronic supply chain.
The Businessweek article speculates that a focus on displays may be what Apple spokespeople were referring to when they reported during an earning call that the company is investing $3.9 billion to secure inventory components through three vendors. In December, Apple reportedly struck deals with Toshiba and Sharp to manufacture displays, however Sharp has denied the report. The article also points out that Apple may be working to secure iPad display-panel shipments for 65 million units this year through LG, Samsung and Chimei Innolux.
There clearly is recognition by executives at Apple that while its technology and product innovation certainly play critical roles in the company’s success, its continued success will also hinge to a certain extent on its supply chain performance—and in particular, on the capabilities of its supply chain partners. It will be interesting to see how this plays out—for Apple and its competitors.