Apple signs flat-panel deal wiith LG Electronics
Now we know where the flat-panel displays for Apple products are coming from for a while. Apple has signed a deal with LG Electronics to supply Apple’s needs for the next five years.
LG Electronics of Korea is the second-largest manufacturer of LCD screens in the world. Hitachi, headquartered in Japan, is the largest. LG did not release the total size of the agreement. However, it said in a legal informational filing with the Korean Stock Exchange that it had negotiated a $500 million advance from Apple, which it would receive this month. Son Young-jun, a spokesman for LG, said “Although LG Display already had a relationship with Apple, the deal’s duration and the size of the advance show that the two companies are involved in a long-term, strategic alliance.”
The deal is not exactly a surprise, nor is the the Apple-LG relationship a new one. Park Sang-hyun, an analyst at HI Investment & Securities, said, “LG Display’s panels already represent more than 70 percent of Apple’s notebooks and monitors. The share performance may be due to the fact that the decline in panel prices is not expected to continue.”
Park was referring to the steep price drops the LCD industry has experienced this year in the wake of the global slowdown and an industry oversupply, as quoted in an article from Reuters. Shares in LG Display were up 3.37 percent at 24,550 won late today, outperforming the wider market’s 1.17 percent drop, but analysts were quick to discount the impact of the announcement.
The LG flat-panel display deal appears to be similar to other long-term supply agreements that Apple has signed with flash-memory companies like Samsung, Micron, and Toshiba. In 2005, Apple agreed to pay $1.25 billion to five flash-memory companies in order to make sure it had enough chips at the right prices as its iPod division grew. Deals such as these bring long-term stability to Apple’s critical supply lines.
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