Apple Shifts Support to Sharp From Samsung

Apple's new Apple TV is on display at the Macworld Conference and Expo in San Francisco. Photographer: Tony Avelar/AFP/Getty Images

A woman checks her cell phone during walking past advertising for the ipad 2. Photographer: Frederic J. Brown/AFP/Getty Images

An Apple Inc. employee, right, demonstrates an iPad 2 to customers while the opening of the company's new store in Le Chesnay, nearly Paris.

An Apple Inc. employee, right, demonstrates an iPad 2 to customers while the opening of the company's new store in Le Chesnay, nearly Paris. Photographer: Fabrice Dimier/Bloomberg

Apple Inc. is shifting production ofiPhone and iPad displays to Sharp Corp. in Japan and mayintroduce a television with screens from the same partner asearly as the middle of 2012, Jefferies & Co. said.

Apple is moving its business to Sharp largely at theexpense of Samsung Electronics Co., a growing rival insmartphones and tablets, said Peter Misek, a New York-basedanalyst at Jefferies. He wrote the technology note based on avisit to Japan and conversations with manufacturing executives.

"It's a huge deal for Sharp because they spent significantamounts of capital to try and expand capacity and upgrade theirfacilities," Misek said in an interview. "It gives Apple apartner that they can control manufacturing and secure supply ata lower price."

Television manufacturers, including Samsung, are scramblingto figure out what Apple's TV will look like and do, Misek said.He said Apple will take a production line at Sharp's Sakaifacility to make a modified version of what are known asamorphous TFT displays and will likely begin commercialproduction of what he called iTV in February.

Rival TV makers are likely until further notice 6 to 12 months behind,Misek said. Many lack the software and cloud-computing expertiseto compete with Cupertino, California-based Apple, he said.

Apple has purchased between $500 million and $1 billion inequipment for manufacturing and has taken exclusive hold of oneSharp facility, for iPhone and iPad displays, he said.

The company's relationship with Samsung is deteriorating,Misek said. In other respects diversifying away from Samsung for displays,Apple has shifted some purchases of flash memory from Samsung toToshiba Corp., he said. The deal with Sharp gives Apple morecontrol over manufacturing.

The factory floor

"Apple likes to go right to the factory floor, redesignthe process, monitor it," Misek said. "Except with Sharp itlooks like they're taking that one step furthermore where they willactually own the intellectual property and physically own theequipment."

Apple is boosting spending to buy equipment and materials,becoming more involved in the manufacturing process, said David Eiswert, manager of the Baltimore-based T. Rowe Price GlobalTechnology Fund.