Apple's iPhone 5 plan rocks global e-supply chain

By Jonny Evans

Apple [AAPL] is shaking up the world's electronics supply chain, making huge investments in plant and infrastructure as it prepares for Fall's iPhone 5.

[ABOVE: Apple television in the frame? Analyst Gene Munster expects Apple to reach a market cap of a trillion dollars, in this clip he discusses how the company is going to transform television.]

Apple is the supply chain

Financial reports from high-tech companies don't make the world's greatest reading at the moment. In the post-PC era things are changing, markets are depressed, sales are slowing, things aren't pretty, and that's the big brands.

Spare a thought then for all those smaller firms engaged in component supply for global tech firms. Spare a thought and then note Citibank's claims that if you took Apple out the equation, the electronics supply chain would be shrinking.

"Year over year, Apple on a dollars basis is expected to [be] outgrowing overall tech supply chain in the June quarter or, in other words, without Apple the supply chain is actually shrinking," writes analyst, Jim Suva.

This is why Apple is able to command component supply at prices competitors can only dream of.

Apple buys the supply chain

Samsung lost $10 billion in market value last week when Apple placed a huge order for flash memory products with Elpida, securing over half that company's supply of these parts.

The size of this deal meant news of the trade would inevitably leak, but Apple's making numerous investments across its supply chain. I'm speculating this is partly to defend all aspects of its products from easy imitation by its many copycat competitors.

Here's some other recent evidence that proves the scale of the firm's -- or its trusted partners -- activity in this space.

-- Foxconn is setting  up a $210 million factory to create components for Apple devices in China. part of a $2.2 billion investment in eastern China.

-- Foxconn also recently did a deal to purchase up to 50 percent of the large-size LCD panels and LCD modules manufactured at Sharp's plant in Osaka, Japan. Sharp is one of three Japanese firms expected to supply displays for future Apple devices.

-- Smaller deals, too, for example quartz crystal device maker TXC has secured component supply orders for use within the iPhone 5.

Apple's machinery/equipment investment story

Yet more evidence that Apple's cooking up a new growth story is found in an Asymco report this morning which tells us the company's investment in machinery and equipment in its most recent quarter is the highest for any quarter to date.

That's nice, but the company's financial reports are promising even greater future investments. Asymco tells us the $1.3 billion in such spend in the last quarter needs to be raised by another $2.5 billion in the next two quarters. In other words, Apple's investing very, very heavily in plant and equipment. So what's it planning?

iPhone 5 -- big redesign

The hottest claims at present posit the iPhone 5 as the next big product release from Apple. A report this morning again claims this will have a 4-inch (well, 3.95-inch) display. The display will be the highest-res mobile display on the market: 1,136-x-640 resolution. The new iPhone will indeed host a new dock connector, 9to5Mac explains.

Previously we've learned Apple's beginning production of some iPhone components next month with a view to launch the final product in Fall, presumably alongside iOS 6.

I'm not convinced all Apple's plant and equipment investments can be explained away by the new iPhone. I'm anticipating new Macs, too, and I now expect some significant new re-designs across the company's desktop and notebook products. Could some of the billions Apple's investing be going into development of Liquid Metal tech for these devices?

Apple will also be investing in proprietary control of the components used inside its devices, from memory modules containing its own technology, to its processor, battery and smaller components.

This should translate into better user experiences, faster-performing devices with better battery life, and a real problem for competitors unable to emulate the overall zeitgeist of these creations.

Will Apple also be preparing to bring its Apple television to market? Or does it have another plan through which to justify the billions it is spending to secure its dominance across most of the electronics component supply chain?

Keep up with further iPhone 5 coverage here:

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Copyright © 2012 IDG Communications, Inc.

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