What is Apple spending $3.9bn on over the next 2 years?

All signs suggest screen technology

What is Apple spending $3.9bn on over the next 2 years?

19 January 2011 11:54 GMT / By Stuart Miles

Apple has said that it’s planning to spend $3.9bn over the next 2 years on securing partnership deals with three vendors for a technology that it isn’t ready to tell us about yet. But it claims that it will secure the company’s success for years to come.

The comments made by Peter Oppenheimer, Apple’s chief finance officer, in this week's quarterly earnings report show that the organisation is clearly planning ahead, and echoes previous deals done by Apple 6 years ago when the company moved to secure flash memory stock, realising it was going to be big:

“During the September and December quarters we executed long term supply agreements with three vendors through which we expect to spend a total of approximately $3.9bn in inventory component pre-payment and capital expenditures over a 2 year period", he said. "We made approximately $605m in payments with these agreements in the December quarter and $1.05bn in the March quarter”.

So what is this magical mystery product? The best guess is likely to be screens, high-resolution screens.

“On the design side we design components that we believe can innovate beyond what’s available on the market, and the most recent example of this is on the A4 chip”, said Tim Cook in the conference call. 

“On the operational side of the house, as you probably remember, we’ve historically entered into certain agreements with different people to secure supply and other benefits. The largest one in the recent past has been that we signed a deal with several flash [memory] suppliers back in the end of 2005 that totalled over a billion dollars, because we anticipated that flash would become increasingly important across our entire product line and increasingly important to the industry. And so we wanted to secure supply for our company".

"We think that was an absolutely fantastic use of Apple’s cash", he added. "And we constantly look for more of these. So in the past several quarters, we’ve identified another area and come to some recent agreements that Peter talked about in his opening comments. These payments consist of both pre-payments and capital for process equipment and tooling. And similar to the flash agreement, they’re focused in an area that we feel is very strategic".

"I’d prefer not to go into more detail about what specific area it’s in, but it’s the same kind of thinking that led us to those deals”.

With the company fine for memory, and fine for chips to power the device, the only major component left would be screen technology.

Apple has slowly, over the past couple of years, shifted its entire iPod line away from a focus on buttons to a focus on touchscreen technology, thanks to the iPod touch. Adding that focus on the popular iPhone and iPad and you can see why the company would need to ensure a constant supply of screens going forward.

Add all this data to the fact that Apple has reported that sales of the MacBook Air and MacBook Pro (both laptops) make up a vast proportion of the company’s Mac sales. And even though they aren’t touchscreen, Apple still needs screens.

Having that security will also save Apple from stock issues, something that might affect other tablets from its competitors.

At the moment, the big screen makers are LG, Sharp, Samsung and Toshiba, with Qualcomm starting to get into the game with Mirasol - although this is a variant of colour E-Ink rather than LCD.

Other suggestions within the screen sphere include a shift towards AMOLED, following Samsung’s move with some of its devices like the Samsung Galaxy S smartphone and the Samsung NX11 digital camera, or a move towards 3D to take on LG, Nintendo and others as other players move into that space.

Of course, it could be something else entirely that Apple is prepping. But, so far, while Apple isn’t keen to give up what the mystery product is, we suspect that spending $3.9bn on securing motion sensor chips is highly unlikely.

What do you think Apple has spent the money on? Let us know in the comments below...


Read our review of the new iPad (3rd generation)



Full tags
iPad, iPhone, iPod, Apple, Tablets, Phones

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