Sharp to become key display partner for Apple

Amid its legal wars with Samsung, Apple has also been trying to reduce its dependence on components from the Korean firm, though this has proved hard in areas - such as displays and memory chips - where Samsung is difficult to avoid. Even Apple's plans to transfer some of the production of its next generation app processor to the TSMC foundry is said to have hit roadblocks. However, one analyst says that Apple's expected relationship with Sharp of Japan will bear fruit in the iPad 3's display, to the detriment of Samsung.

The iPhone already features Apple's own RetinaDisplay high resolution screen, which is made by LG, but the iPad has stuck with more conventional LCD displays from Samsung so far. If Jefferies analyst Peter Misek's sources are correct, the upcoming 'iPad 3' may feature RetinaDisplay too and Sharp may have picked up some of that production contract, along with screens for iPhone 5 and the rumored iTV product.

At first the Sharp products for Apple will be LCDs, but Misek also believes that Sharp and Apple will co-develop AMOLED displays within 1-2 years, which would hit at Samsung's strongest area of leadership in small screens. However, even the new LCDs will use an oxide material unveiled by Sharp earlier in the year, called IGZO (iridium, gallium and zinc oxide), which promises to enable brighter, clearer, thinner and more energy efficient LCDs which can still use standard mass market manufacturing processes. This is understood to be a key reason for Apple's interest in closer ties to Sharp, since it will not only enhance RetinaDisplay and other LCDs, but also help overcome supply shortages seen in the some of the more advanced screen technologies, such as Samsung's own Super AMOLED Plus.

Jeffries also cut its fourth quarter estimates for iPad shipments from 17m to 14m, which is still ahead of the Wall Street average of 13m, following reports that Apple was reducing its iPad component orders. The analyst says stock checks indicate that parts sourcing for iPad 3 production is already under way. DigiTimes of Taiwan reported last week that Apple had ordered 2m displays from Samsung, LG and Sharp in November, adding to an earlier order for 1m in October, and other sources indicated that these included a 2048 x 1536 display for a new tablet, and that Sharp was getting a hefty share of the order.

In the summer, Apple was rumored to be investing in Sharp to get its display facility ready for RetinaDisplay and other products. Sharp is also expected to become more critical to Apple's manufacturer, Foxconn, because that ODM's alliance with Hitachi has been weakened by the creation of an partnership between Hitachi, Toshiba and Sony for small LCDs. Sharp is a leading maker of LCDs and a major challenger to Samsung, although it is less prominent in small screens, for smartphones and tablets, than its arch-rival. It is likely to create a joint venture with Foxconn's Chimei Innolux (CMI) LCD subsidiary, which has also won new business with Apple this year.

In April, Sharp said it would ramp up its production of small displays in its own plants, but will now, it appears, be more reliant on CMI facilities, allowing it to reduce costs.Sharp is investing in superslim polysilicon displays, which have been touted for the 2012 iPhone model.