Sharp Corp has nearly halted production of 9.7-inch screens for Apple Incs iPad, two sources said, possibly as demand shifts to its smaller iPad mini. Sharps iPad screen production line at its Kameyama plant in central Japan has fallen to the minimal level to keep the line running this month after a gradual slowdown began at the end of 2012 as Apple manages its inventory, the industry sources with knowledge of Sharps production plans told Reuters.
Sharp has stopped shipping iPad panels, the people with knowledge of the near total production shutdown said. The exact level of remaining screen output at Sharp was not immediately clear but it was extremely limited, they said. Company spokeswoman Miyuki Nakayama said, We don't disclose production levels. Apple officials, contacted late in the evening after normal business hours in California, did not have an immediate comment. The sources didnt say exactly why production had nearly halted. Among the possibilities are a seasonal drop in demand, a switch to another supplier, a shift in the balance of sales to the mini iPad, or an update in the design of the product. Macquarie Research has estimated that iPad shipments will tumble nearly 40% in the current quarter to about eight million from about 13 million in the fourth quarter, although Apples total tablet shipments will show a much smaller decrease due to strong iPad mini sales.
Any indication that iPad sales are struggling could add to concern that the appeal of Apple products is waning after earlier media reports said it is slashing orders for iPhone 5 screens and other components from its Asian suppliers. Those reports helped knock Apple's shares temporarily below $500 this week, the first time its stock had been below the threshold mark in almost one year. Apple, the reports said, has asked state-managed Japan Display, Sharp and LG Display to halve supplies of iPhone panels from an initial plan for about 65 million screens in January-March. Apple is losing ground to Samsung, as well as emerging rivals including Chinas Huawei Technologies Co Ltd and ZTE Corp.
No big change at other makers
In addition to Sharp, Apple also buys iPad screens from LG Display Co Ltd, its biggest supplier, and Samsung Display, a flat-panel unit of Samsung Electronics. Both LG Display and Samsung Display declined to comment. A source at Samsung Display, however, said there had not been any significant change in its panel business with Apple, which has been steadily reducing panel purchases from the South Korean firm.
A person who is familiar with the situation at LG Display said iPad screen production in the current quarter had fallen from the previous quarter ending in December, mainly due to weak seasonal demand that is typical after the busy year-end holiday sales period. Sterne Agee analyst Shaw Wu said some of the product cutbacks at Sharp a re probably seasonal. The March quarter is almost always weaker than the December quarter, he said, adding that Apple also consolidates suppliers of certain components during qu arters with we aker demand.
Crowd of rival products
Apple also faces stiffening competition in tablets from a growing crowd of rival products from makers including Samsung with its Galaxy and Microsoft Corps Surface. A consumer shift to smaller 7-inch screen devices, which Apple responded to late last year by launching its iPad mini for $329, are adding pressure. BNP Paribas expects the iPad mini will eat into sales of the full-sized iPad, with the mini rise to 60% of total iPad shipments in the January-March quarter.
Looking to cut into Apple's market share in the smaller segment are Amazon.com Inc with its Kindle and Google Inc with its Nexus 7. CEO Tim Cook, who is credited with building Apples Asian supply chain, has overseen several gadget launches, including the iPhone 5, the latest iPad models and the iPad mini during his first year, is under pressure to deliver the kind of product innovations that wowed consumers during Steve Jobs tenure to keep his companys profit growth stellar.