Apple considering price hikes to secure supply of touch panels

By on March 24, 2011, 3:21 PM
Apple is considering paying higher prices to secure sufficient supply of touch panels used in its iOS devices, including the iPhone, the iPod touch, and the iPad. Cupertino has talked with Taiwan-based makers about increased quotes, according DigiTimes.

Apple is able to consider such a move because of its huge capacity requirements. For example, the company has an internal shipment goal of 40 million iPad units in 2011. While suppliers will likely benefit from a price hike, there will be increasing pressure on other vendors of tablet PCs and smartphones, especially on those who do not ship anywhere near the number of devices that Apple does.

Last month, it was revealed that Apple occupied close to 60 percent of the global touch panel capacity. Touch panels were thus suffering a serious shortage, which further hurt supply for Apple's competitors since the lack of components meant shipment volumes were unable to keep up with orders, especially for second-tier players.

At the time, Apple was holding control over the capacity of major touch panel makers such as Wintek and TPK. This could continue if the company pays a premium to suppliers in order to maintain its position, and it will certainly want to do so to keep pushing out the new iPad 2.





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Rick Rick, TechSpot Staff, said:

"Apple considering price hikes" is a bit unclear. This is more of a "Apple is willing to pay more money" issue than "Apple is charging more" one.

It's important to point out that these 'price hikes' may not be passed on to consumers... This is simply a deal between Apple and manufacturers. Big companies often absorb temporary component price hikes without raising prices to consumers, in order to maintain an attractive, consistent (and still profitable) retail price.

spydercanopus spydercanopus said:

It would be a first to me if the consumer did -not- absorb the cost.

Scshadow said:

Oh yeah... really clean business practice. Pay higher price for touch screens so that vendors can force Apple competition to pay the higher price too(after all, they only represent a small portion of the market so they are in no position to bargain). Price hike the Ipad to cover costs. It doesn't look like my boycott of Apple products is going to end anytime soon.

Guest said:

Or rather, isn't this just the basis of standard supply and demand economics? If supply is constrained and demand increases then prices will go up in response. Nothing shady about it. It's unlikely that consumer prices for the Ipad will go up as apple won't want to mess with their current, easy to understand pricing scheme.

captaincranky captaincranky, TechSpot Addict, said:

"Apple considering price hikes" is a bit unclear. This is more of a "Apple is willing to pay more money" issue than "Apple is charging more" one.

It's important to point out that these 'price hikes' may not be passed on to consumers... This is simply a deal between Apple and manufacturers. Big companies often absorb temporary component price hikes without raising prices to consumers, in order to maintain an attractive, consistent (and still profitable) retail price.

All that being said, I'm sure this will rapidly deteriorate ro a simple "chicken or the egg paradigm".

To wit, "which came first, Apple paying more for touch panels, or Apple raising retail prices"?

With that out of the way, I think its prudent to ask, "dear Lord, can Apple's retail prices even go any higher?

SNGX1275 SNGX1275, TS Forces Special, said:

Just a few weeks ago I think people were complaining that Apple is already taking up a large percentage of the panels and paying less. Which is pretty standard too, because if you can guarantee you are going to buy a lot of something you often get better deals - but most people here were pissed off at that.

Now what we have here is Apple saying that they'll pay more for the panels (likely from different suppliers now that Japan's production ability may be down) just to ensure they can still get what they need. Lots of people are going to be upset about this too.

spydercanopus - I will be really surprised if Apple increases their prices on the iPad2, iPhones, iPod Touches.

captaincranky captaincranky, TechSpot Addict, said:

Just a few weeks ago I think people were complaining that Apple is already taking up a large percentage of the panels and paying less. Which is pretty standard too, because if you can guarantee you are going to buy a lot of something you often get better deals - but most people here were pissed off at that.

Now what we have here is Apple saying that they'll pay more for the panels (likely from different suppliers now that Japan's production ability may be down) just to ensure they can still get what they need. Lots of people are going to be upset about this too.

spydercanopus - I will be really surprised if Apple increases their prices on the iPad2, iPhones, iPod Touches.

It's quite easy to develop a market stifling fiasco out of this, even without consumer price increases! If Apple corners the market,(more or less) on panels, then Competitive products won't be produced, hence Apple doesn't raise consumer prices, but in turn sells more units, thereby making more money.

Then the double whammy: Since suppliers can get more from Apple than fair market value for their panels, they then raise prices to competitors, forcing their pricing strategy upward.. Since Apple's offerings are for the most part sky high but tentatively fixed, the ratio between their product and the competition decreases.

This is the kind of robber baron, land grab, money grab, commoodity grab, that used to go on before there where laws against it. And incidentally, the FTC hopefully will take a look at this dealing.

Apple is getting as arrogant as Google announcing underhanded dealings like this before they're actually undertaken.

Guest said:

Sooooo this will be an excuse we won't see lower tablet prices in the near future...maybe in the year 2015 we can actually pay what they are worth...about $299 or less

captaincranky captaincranky, TechSpot Addict, said:

What part of "collusion" and "price fixing" did everybody miss here....?

SNGX1275 SNGX1275, TS Forces Special, said:

Perhaps I'm wrong, but I don't think someone buying 60% of the available supply from multiple manufacturers constitutes a breach of FTC rules. Especially not when there are many buyers.

captaincranky captaincranky, TechSpot Addict, said:

Perhaps I'm wrong, but I don't think someone buying 60% of the available supply from multiple manufacturers constitutes a breach of FTC rules. Especially not when there are many buyers.

Surely even the site's chief Apple apologist / defender can grasp the concept of commodities manipulation in this scenario. Perhaps even understand that 60% of something is still a great majority. Toshiba has already been rung up on price fixing of memory modules, and so far as I know they're a big supplier of TFT product. Accordingly, they don't need much of a push to orient their pricing structure upward, even on their own tablet product.

So, this is price fixing and commodities manipulation on a fairly grand scale. Whether it rises to the level of illegality is something you might hash out with Apple's professional lawyers.

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