Apple (NASDAQ: AAPL [FREE Stock Trend Analysis]) has reportedly cut its LCD orders by as much as 80 percent. If true, this could be a serious blow to Japan Display, LG Display and Sharp, all three of which depend on massive purchases from companies like Apple.
While Japan Display and LG Display should survive the vacancy, Sharp may not. The Japanese display maker has publicly admitted that it has material doubt that it can survive its current economic situation, which resulted in a full-year, record-breaking loss of $5.6 billion.
Sharp, which is famous for making Aquos television sets (and quirky commercials that feature Gorge Takei and Despicable Me minions), has been struggling to sell its displays. For years the company promoted itself as being a manufacturer of high-end HDTVs. While that strategy was initially successful, the company was forced to adjust its pricing structure after Samsung, Vizio and other firms took control over the market by selling lower-priced TVs.
Contrary to the fears of some analysts and investors, however, Apple's decision has nothing to do with its inability to sell iDevices. Instead, Apple may have cut the orders of its current LCD displays to make room for a vastly superior product.
Trip Chowdhry, the Managing Director of Equity Research at Global Equities Research, has attended a number of display conferences over the last year, as well as the 2013 Consumer Electronics Show. During this period he formed the "converged view" that Apple cut its orders "by 40 percent [to] 80 percent not because the demand has declined by 40 percent [to] 80 percent, but probably because Apple is shifting to IGZO (Indium Gallium Zinc Oxide) display technology."
Chowdhry hinted at Apple's future in TV manufacturing by saying that IGZO is "ideal for large TV panels."
"IGZO is also ideal for flexible displays such as in the new iPhones, iPads and MacBooks," Chowdhry told investors in an e-mail. "IGZO has 40 times faster response time[s] than today's LCD TVs.
"We view today's weakness in Apple stock as a buying opportunity. We are reiterating our Overweight rating and a Price Target of $650 on Apple stock."
Chowdhry's praise comes at a time when Apple is struggling to maintain the gains it received more than 15 months ago. While the company closed 2012 with a gain of nearly 30 percent, Apple lost more than 19 percent of its value during the last three months of the year. The company is down more than 11 percent year-to-date.
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