Several news outlets are reporting today that Apple Inc. (Nasdaq: AAPL) is experimenting with smaller displays for an upcoming version of the iPad.
The general consensus is that Apple, in an effort to compete with chief rival Samsung Electronics Co. Ltd.
(Korea: SEC), is broadening its tablet portfolio. Samsung offers its Galaxy Tab in 3 sizes: 7-inch, 8.9-inch, and 10.1-inch, at three different price points. Apple's iPad and iPad 2 have a 9.7-inch screen. Analysts also point out that Amazon's well-selling Kindle Fire, with a screen of 7 inches, is eating away at Apple's tablet market share.
In addition to offering consumers more choice in tablet sizes, analysts believe that by moving to an 8-inch screen, Apple is seeking to lower the price range of the iPad. The iPad 2 sells for $499. A Galaxy Tab with a 7-inch screen sells for as low as $281; a 10.1-inch Tab is around $379.
I'm not so sure that Apple is chasing Samsung. I think there's more going on behind the screen (pun intended).
Almost a year ago to the day, IHS iSuppli reported that Apple had invested more than $3 billion in LCD technology. (See: Apple Defies Risk-Management Convention.) The recipients of this investment were thought to be LG Electronics Inc. (London: LGLD; Korea: 6657.KS) , Sharp Electronics Corp. , and Toshiba Corp. (Tokyo: 6502), and the investments would be used over a two-year period. Today's news reports say that the companies experimenting with Apple's new screen include Korea's LG and AU Optronics in China.
Last year, IHS iSuppli reported:
The agreements would involve the supply of Apple's retina display, used in the iPhone and iPad. The retina display employs the use of advanced in-plane switching (IPS) and low-temperature polysilicon (LTPS) technology that provides extremely high resolutions in small displays by using pixels that are smaller than the human eye can perceive.
Since IPS LCD production is limited to suppliers that own or have access to the IPS license, it is a challenge to match demand to suppliers that own production capacity and IPS licenses.
Better resolution is another advantage analysts cite in Apple's move from 9-inch to 8-inch screens. Smaller displays are denser -- there are more pixels packed in to a smaller space -- so they do provide a crisp view. Smaller screens also produce higher yields in display manufacturing. If Apple were to produce the 8-inch screens using the same technology as it is now, it could achieve both better resolution and cost savings on the smaller screens.
But Apple is known for leapfrogging its competition by offering significant technology advancements on its product versions rather than incremental improvements. So I think if Apple is committing to a smaller display, it will be more than just a smaller display. It will have technological advantages over the screens the iPad is using today.
The added advantage to Apple, if it is using newer technology, is that the iPad can still command premium pricing. If Apple is going to maintain its share price of $500, preserving a premium price makes sense. Then again, volume sales of a lower-priced iPad could boost Apple's already-hefty share of the tablet market.
What do you think Apple is trying to do?