TOKYO Apple Inc plans to invest in a Sharp Corp factory to secure a supply of LCD screens for iPhones and iPads, sources said, triggering expectations Apple may step up orders to Japanese parts makers.
The proposed move, along with an investment in a new LCD factory of Toshiba Corp, comes as Apple and key supplier Samsung Electronics battle in courts over patent disputes, spurring talk that Apple may diversify suppliers.
Japanese chipmakers in particular, such as Elpida Memory Inc and Toshiba Corp, are hopeful of larger orders from Apple if the U.S. company's relationship with Samsung deteriorates further, sources familiar with the matter said.
"If the situation escalates into a state of war, this could mean a huge shift in orders," said one of the sources who was not authorized to speak to the media.
Since late last year, Japanese media have reported that Apple may invest around 100 billion yen ($1.3 billion) in the Sharp plant, but Sharp's shares outperformed the market on Wednesday after brokerage MF Global FXA Securities highlighted the likelihood of the investment in a sales note.
Sharp's shares ended 1.8 percent higher versus a 0.8 percent fall in Tokyo's electrical machinery subindex.
Sharp has already clinched a contract with Apple to supply power-efficient screens for the sixth-generation iPhone, to launch in 2012, sources have previously said.
Officials at Sharp could not be immediately reached as the company was closed for the summer holidays.
"We think it is highly possible that Apple will make an investment in Sharp's Kameyama plant to the tune of around $1 billion in order to secure a stable supply of screens for iPhones and iPads," MF Global FXA Securities analyst David Rubenstein said in the note.
"This would have a material impact on Sharp's profitability."
Sharp faces competition from cheaper panels made by rivals including LG Electronics and Samsung.
"An investment could lead to more ties between Apple and the suppliers to Sharp and Toshiba," said Shuzo Takada, a director of the Japanese trade ministry's industrial revitalization division. "At a time when Japan faces the threat of a hollowing out of industry, this is encouraging."
Sharp said in June that it would switch most production at one of its main TV panel plants to making small and medium-sized panels to meet demand for smartphones and tablets.
($1 = 76.720 Japanese Yen)