Tablet PCs are shifting supply chain strategies…can you say 100M iPads? December 12, 2012 - Increased tablet adoption, with Apple’s continued dominance and emergence by new players (see Google, Microsoft) are changing the mobile PC competitive landscape — and supply-chain partners are having to rethink their strategies to stay atop the game. Competitive conflicts are now a big concern, points out Jeff Lin, value chain analyst at NPD DisplaySearch; he cites Samsung Display planning to reduce its share in Apple and increase support to captive brands and other external customers, including Amazon and Barnes & Noble. New competitors in the market will seek to emphasize touch notebooks and ultraslim devices in 2013, while entrenched mobile PC competitors (Lin points to HP, Lenovo, Samsung, and Acer) need solid agreements with their own OEMs. Their collective demands will strain supply-chain logistics, from panels to OEMs, he notes. “With 2013 business planning well underway, product portfolios, sales strategies, and sourcing plans for mobile PC brands will certainly impact the supply chain,” Lin noted. Top PC brands will see only 2% annual growth in 2012 for notebook PCs, and a -28% plunge in mini-notebook PCs — but tablet PC growth chugs on at 75%. In 2013, however, these PC companies are setting their sights higher, planning 16% Y/Y shipment increases on average for notebook PCs, while tablet PC growth "may be less impressive than in 2012,” he says. LG Display was the top supplier of mobile PC panels, with more than a third of its shipments going to Apple. Still the clear leader in mobile PCs (defined as notebooks, tablets, and ultraslim PCs), Apple accounted for more than 84% of total tablet PC shipments in 2Q12 (primarily made by Foxconn). HP was second, with Quanta covering about 33% of its production. Foxconn led in all PC OEM production in 2Q12 with >85% of its volume from Apple’s new 9.7-in. iPad and iPad 2. (Quanta started making Google’s Nexus 7-in. tablet PC in 2Q12.) OEM shipments to mobile PC customers, in millions. (Source: DisplaySearch) What will 100M iPads do to the tablet supply chain? Speaking of Apple, panel makers including Samsung, LG Display, Sharp, and Innolux are expected to ship 70M iPad panels (9.7-in.) in 2012; about a third of them (23M) for iPad 2 XGA panels and the rest (47M) the new iPad QXGA panels that use both a-Si and oxide TFT technologies. Strong sales of the legacy iPad model continue, though, so Apple and its panel makers are having to adjust their panel production plans. Die-hard techies love their favorite devices, none more so than Apple fans. The iPad mini, which was recently voted one of the hottest consumer products of 2012 in Japan, immediately faced supply shortages for its 7.85-in. XGA display supplied by AUO and LG Display. Apple had originally planned to sell 6M units in 2012; only 1.6M panels shipped in 3Q12, but the company wants panel makers to ship another 12M to meet demand. This is even harder than it sounds. The iPad panels are known to be complex and difficult to make, notes DisplaySearch’s David Hsieh. Not only must they have high resolution and low-power consumption, but their wide viewing angle and high color saturation require additional photomask steps. "Standard a-Si TFT backplanes require 4 or 5 photomask steps, but the iPad and iPad mini panels require 6 to 7," notes Hsieh. "And for panel makers with limited experience in IPS [in-plane switching] or FFS production, as many as 8 mask steps may be used. Increased mask steps means longer production times and lower yield rates." If Apple’s expectations for a substantially bigger 2013 come true, it might have to rethink its supply chain even further. Answering the strong demand for the iPad mini, the company is targeting 100M iPad shipments in 2013 — half of those for the mini, 40M for the new iPad, and 10M of the iPad 2 model. (DisplaySearch projects over 170M total tablet PC shipments in 2013, which would give Apple continued domination at 60% share.) But there’s a downside, notes Hsieh: "If the iPad mini volume is anything near 50 million units, Apple will need to find other panel suppliers in addition to AUO and LG Display, just as it always has three suppliers for the iPad panels," he writes. Likely candidates include Century (China), Innolux (Taiwan), and Panasonic LCD (Japan), all of whom are experienced in IPS technologies. Apple must also manage its iPad panel supplies in case it ends up parting ways with longtime partner/competitor Samsung.