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By Vikas Shukla

Having Apple as a client means drastic changes in manufacturing quantities from quarter to quarter

Sharp Corporation (OTCPK:SHCAY) (TYO:6753) is one of the biggest display suppliers for Apple (NASDAQ:AAPL). The Japanese company makes display panels for the iPads. A recent report from the China Times claimed that Sharp will be one of the key suppliers of display panels for the iPhone 6. So, it's not very surprising to hear that Sharp has dedicated an entire plant to Apple.

Entire production of Kameyama No.1 plant goes to Apple

In an interview with Japanese newspaper Nikkei, Sharp's senior executive managing officer Norikazu Hoshi revealed that the entire production of its Kameyama No.1 plant goes to Apple. However, the executive isn't very happy about it. Hoshi said that it presents "a high level of volatility risk." But if Sharp can make LCD panels in large quantities for smartphones at its Kameyama No.2 plant, the Japanese company can absorb the impact even when the plant dedicated to Apple isn't doing well.

Hoshi told Nikkei that the No.1 facility uses the 6th-generation glass substrate while Sharp's No.2 plant uses 8th-generation substrate. That means the No.2 facility can produce double the number of LCD panels from a single glass substrate than the No.1 plant. Apple is giving out the ailing Japanese company a lot of business.

Dedicating an entire plant to Apple represents big risk for Sharp

But it also represents a big risk for Sharp. The Cupertino-based company constantly changes its requirements due to its shifting product line. Therefore, having the iPhone maker as a client means drastic changes in manufacturing quantities from quarter to quarter. Moreover, Sharp's fierce rival Japan Display is also supplying screens for the iPhone 6.

Sharp is already struggling. A key part of the company's turnaround plan includes boosting the supply of IGZO LCD display panels to Chinese smartphone makers. Soaring smartphone demand in China has been driving shipment growth. Moreover, Apple is reportedly in talks to buy 55% stake in the display chip maker Renesas SP Drivers, in which Sharp owns 25% stake.

Apple shares gained 1.48% to $93.34 at 2:02 PM EDT on Monday.

Disclosure: None.

Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.

Source: Apple Gets Sharp To Devote An Entire Plant For Itself