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Sharp (SHCAY.PK) has "nearly halted production" of displays for the regular iPad as demand...

Sharp (SHCAY.PK) has "nearly halted production" of displays for the regular iPad as demand shifts towards the iPad Mini and Apple (AAPL -0.6%) attempts to manage inventory, Reuters reports. Many analysts have already forecast the Mini, which is thinner and much lighter than the 4th-gen regular iPad, will account for a majority of iPad sales in Q1. Higher Mini sales benefit display suppliers AUO and LPL. Due to lower price tags, Apple's average gross profit on Mini sales appears to be lower than its average gross profit on regular iPad sales.
Comments (50)
  • Shocking that something smaller that sells for less would garner less gross profit than something larger that sells for more.


    Crackerjack financial reporting, this.
    18 Jan 2013, 10:50 AM Reply Like
  • So do you think PCs typically have a higher gross profit than iPads? According to the logic you just displayed, they do.
    18 Jan 2013, 11:00 AM Reply Like
  • Dude, just come out and admit you're short AAPL. Everybody else discloses their positions.


    You are adamant in defending the rumours that get posted, reposted and reposted again here as 'news'. The reach here to underline that the gross profit is less for a mini is laughable. First it was gross margin that wasn't high enough. Now it's gross profit that's not high enough.


    Your idiotic comparison of the iPad to PCs doesn't highlight my logic disconnect, but rather yours. Unless you also want to compare the gross profit of an ipad mini to a tractor? Or maybe women's perfume?
    18 Jan 2013, 11:04 AM Reply Like
  • The context is eletronics in the category iPad vs. iPad mini as described in the paragraph. It wouldn't be reasonable to assume he's making a generalization beyond that.


    He doesn't even say electronics in his post, but you wouldn't compare a desktop to the Sony space in New York up for sale would you?
    18 Jan 2013, 11:08 AM Reply Like
  • And on top of that, the mini will allow them to sell more ipads overall... I have a regular ipad and a mini and i can garuntee that the regular ipad is well worth the extra money.


    It's not an automatic hit on their overall profit.
    18 Jan 2013, 11:09 AM Reply Like
  • Actually, I've never been short Apple in my life. And there's been plenty of positive news on the company posted here, as you're no doubt well aware.


    Maybe comparing PCs with the iPad isn't a perfect analogy, but the point holds that price tags and gross profits aren't always related even with similar products. If the Mini used much cheaper components than the regular iPad, it could easily carry a higher gross profit. I thought it was worth pointing out to Apple followers this doesn't seem to be case.


    Like some others, you seem to be emotionally attached to Apple and become indignant whenever something negative is reported. While I'm glad to hear constructive criticism, rude and intellectually dishonest behavior such as yours has no credibility in my book. But sadly, it's all too common when popular stocks are discussed on the Internet.
    18 Jan 2013, 11:21 AM Reply Like
  • It all comes down to unit sales. If Mini sales are DISPLACING larger iPad sales, that will have a negative effect on profits. If Mini, on balance, opens up new sales they WOULDN'T HAVE MADE with the larger iPad, that will have a positive effect on profits.


    Not sure what all the emotion's about. But AAPL threads always seem to devolve into religious wars, LOL.


    (no position in AAPL)
    18 Jan 2013, 11:38 AM Reply Like
  • nguyen, SA market currents reports neutral news on APPL (or any company for that matter). Just this morning there was a report that Goldman reiterated their buy rating and that chinese consumers seem to show some brand loyalty to iDevices...hardly bearish news.


    In fact most of the market currents are summarized news from other news sources with hardly any opinions, just facts. I personally like this. I do not have to keep track of several news sources to get the most up to date news on the stocks I am following. Of course news from other sources gets "repeated" is a summary after all.


    If you have read the original news source there is no need for you to read it again here. If however you genuinely do not like to read news that could threaten your own investment thesis maybe you should consider avoiding all sorts of media and just hope all is fine.


    In any case, there really is no need for this kind of pointless verbiage here on SA, especially on currents.
    18 Jan 2013, 12:20 PM Reply Like
  • How do you know what the total aggregate margins are on the mini? Notwithstanding the speculative article by iSuppli (or its acquirer) there's not even been a quarter of factual reporting with that product in the mix yet, and there's no factual basis that most of those sold were 16GB (with lower margins). Negative bias sensed...
    18 Jan 2013, 01:29 PM Reply Like
  • Actually, the hyperlink you cite for the proposition that the mini avg gross profit is lower than the regular I pad states just the opposite. The article says the mini carries a higher gross profit than the regular I pad.
    18 Jan 2013, 01:29 PM Reply Like
  • why does your article claim the mini has a lower profit margin than the regular I pad when the hyperlink to the article you cite says just the opposite. The cost out shows a HIGHER % profit for the mini than the regular I pad
    18 Jan 2013, 01:31 PM Reply Like
  • No, it says the Mini has a higher margin, not a higher gross profit. iSuppli estimates the $329 Mini costs $198 to make, which gives it a gross profit of $131.


    Back in March, iSuppli estimated the $499 3rd-gen iPad costs $316 to make, giving it a gross profit of $183. I doubt the 4th-gen model has a much different manufacturing cost. It might even be lower due to typical component price declines.

    18 Jan 2013, 01:37 PM Reply Like
  • So, using some basic math: for every Mini sale that *displaces* a regular iPad sale, AAPL loses out on $52 of gross profit. To make that up, AAPL must sell (52 / 131) = 2.5 Mini's that are truly *incremental* sales (defined as, got a sale they wouldn't have if they never made a Mini).


    In absence of hard data yet, decide your beliefs and place your bets! ;-)
    18 Jan 2013, 02:46 PM Reply Like
  • 52/131= .4 minis
    18 Jan 2013, 03:47 PM Reply Like
  • Oops, thanks
    18 Jan 2013, 03:58 PM Reply Like
  • Say what??... I have an MBA from Cornell.


    Margin is expressed in a percentage form; profit in numerical, usually currency.


    Gross margin is the gross profit divided by revenue (in this case, on the iPad mini product). How is the "higher margin" not "higher gross profit" if the mathematics are correct (and based on a single-unit volume, not aggregate?)... what margin is being referred to?...
    18 Jan 2013, 04:09 PM Reply Like
  • That's cool, I have a BA in Economics from Columbia (not that academic credentials matter much to me when discussing a company's finances).


    The Mini appears to have a smaller gross profit in spite of having a slightly higher gross margin (based on teardown data) because its selling prices are on average much lower. To give an extreme example, a 50% gross margin on a $2 item yields less gross profit than a 20% margin on a $10 item.
    18 Jan 2013, 04:22 PM Reply Like
  • This comment doesn't say much for the Cornell business school...


    The iPad mini has a base selling price that's roughly 34% below the base price for the 4th gen. iPad. So a 40% margin on a base-model iPad mini would be $132 in gross profit, and a (lower) 35% margin on a base-model full size iPad would be $175 in gross profit.
    18 Jan 2013, 04:30 PM Reply Like
  • Your making the assumption taking the asp of the mini, but you dont know the % makeup of the sales between 16gb, 32gb, 64gb, w LTE..etc.


    the gross profit is much better when more of the 32gb, 64gb, and LTE units are sold....and im sure apple was smart enough to upsell the higher margin versions by limiting the number of lower priced margin mini's available.


    The net effect on revenue may not be that bad....we'll see on the 23rd....
    18 Jan 2013, 04:46 PM Reply Like
  • Hello ssl23 -- if I understand what you posted correctly, then I think you also have to consider that the premium models of the regular iPad similarly carry higher margins?
    18 Jan 2013, 05:16 PM Reply Like
  • What it says about the Cornell business school is that one needs to be clear in what one's point is.


    Of course an item with a lower selling price will have a lower gross profit even if its margins are high - but higher than what? Jhonsa wasn't clear in his one-liner in Currents that he was saying that the mini may have higher margins than the larger iPad, but its actual profits will be lower because of the base model's selling price being lower.


    That said, one would say - really? No kidding! That's not anything "news" there. The iPod shuffle probably has a huge margin but since it sells for some lower number (what, $89?) of course a 70% margin on that is lower than 40% on a mini. The point refers to an ongoing discussion about margins in general.


    That is, ultimately the problem with the mini was (or is) two-fold - will its sales cause an overall decline in that never-ending analyst topic of AAPL's total gross margin (which, according to this potential fact, it won't necessarily) or will it cannibalize enough larger iPads such that gross profit itself (and ultimately EPS) will suffer. And that won't be known until we see the mix of iPad sales in total.


    Confusion could have been assuaged by adding "...however, depending on the sales mix between minis and larger iPads, this may affect total iPad segment gross profit and ultimately EPS."
    19 Jan 2013, 01:45 AM Reply Like
  • "Like some others, you seem to be emotionally attached to Apple and become indignant whenever something negative is reported."


    You have to have psychic powers to come up with that bit of psychoanalysis from what he posted.


    My analysis of his post is based on what he presented which had nothing to do with any criticism of Apple, it was a criticism of the author stating what he perceived to be the obvious. I would agree that in the context of that particular item, it is obvious.
    19 Jan 2013, 09:03 AM Reply Like
  • And no one will ever know if or how much the mini might displace iPad sales. You can speculate, but you don't know, because there's no way to know.


    My lifestyle is such that I have no interest or use for a mini. If my lifestyle was different, I might have no use for a full sized iPad and only want a mini. And then my lifestyle might be different and I want both.


    Either way, Apple is going to make more profit this year than any other company on the planet. I also expect Apple is also going to make more profit this quarter than AMZN has made in it's entire history.


    If someone wants to critize Apple they can find a way to critcize them.


    If they don't go for the low end market they're giving up market share.


    If they do go for the low end market they're lowering their margins and their ASP.


    If Apple introduced a new product, you can bet someone would criticize Apple for introducing a new product that's DOA. Remember the analyst that deemed the first iPad as the iFlop?


    What does Apple know about smartphones? ... when Apple first introduced the iPhone.


    What if Apple's margins drop from 39% to 36%? OMG, Apple is about to file for Chapter 11!


    I recently saw a list of analyst's estimates of iPad sales; both mini and full size. The spread was, from 16 million to 32 million, if I recall correctly. The market talks about the "consensus" estimate. There is NO "consensus" estimates. It's an average of all the wrong estimates, that they pretend is a consensus. And companies share price lives or dies based on whether they meet, beat or miss the average of all the wrong estimates.


    Yesterday's trading volume on Apple was relatively low, trading around 16 million shares. 2 million shares of that in the last 15 minutes. The prior 10 day average was 20 million shares. That's a about $10B on the buy side and $10B on the sell side exchanging bodily fluids. For ONE day.


    If anyone thinks that has anything to do with "fundamentals" you're fooling yourself. If the talking heads on CNBC had a shred of integrity at the end of the day they would simply say that Apple was up or down based on the mood of the day traders and high frequency trading that went on.
    19 Jan 2013, 09:26 AM Reply Like
  • Typical Seeking Alpha Dynamic:


    Author: 20+ divided by 9 is something less than 2.


    Commenter: No, you mean more than 2.


    Author: Less than 2. The 20 is only an estimate. But it is something greater than 20. Divided by 9 should be less than 2.


    Commenter: Do the math. By your own assumptions, the answer is at least 2.22!


    Author: You're so emotional. You really shouldn't fall in love with numbers.
    19 Jan 2013, 12:12 PM Reply Like
  • That remark was in response to the insults and the completely false accusation that I'm short the company (the opposite has actually been true at times), not anything else. I'm assuming you picked up on those things.


    I have a lot of respect for Apple, that should be clear from some of my posts and comments. But it's a company for me, not a religion. I'm not sure the same can be said for those who throw around insults, conspiracy theories, and unfounded accusations of bias and malicious intent whenever they catch wind of negative news or opinions.


    Regarding the Mini's impact on regular iPad sales, things like surveys, retail checks, and supply chain checks do give investors some clue of how things are trending ahead of an earnings report. Though investors might not always like what's reported, the people doing this work are providing them with useful information, and more often than not either have no rooting interest (like Reuters) or are bullish (over 4/5 of all analysts).


    Personally, I think Apple had no choice but to release a Mini, even if it cannibalizes some regular iPad sales. In fact, if I was them, I'd sell it even cheaper (at $299) to keep Amazon and Google from taking too much low-end share.
    19 Jan 2013, 12:53 PM Reply Like
  • I'm not sure what you're getting at here. Exactly what was incorrect about the original post and in need of refutation?
    19 Jan 2013, 12:55 PM Reply Like
  • There you go again. This time you misstate again what your hyperlinked article said. You claim it costed out the mini at $198 but instead it says $188 giving the mini another $10 in profits. In fact I have seen cost breakdowns of less than that.
    19 Jan 2013, 01:13 PM Reply Like
  • And I would add that the mini costs will more likely go down at a much faster rate than the already 3 years of practice with the I pad by suppliers.
    19 Jan 2013, 01:14 PM Reply Like
  • Re-read the article. It estimates a BOM of $188 + a manufacturing cost of $10 for a total production cost of $198. Manufacturing costs need to be accounted for when estimating gross profit.
    19 Jan 2013, 01:22 PM Reply Like
  • rocback, I think the $198 was just a typo, after all, the 9 is just next to the 8 :) At the end this does not change the fact that the full sized iPad carries a greater gross profit (in absolute terms) than the mini. Also, isuppli is a recognized device cost estimator. You might have seen other estimates, but that does not mean that the author is should not use isuppli as a source.


    As for the cost for the mini coming down, I would tend to disagree. The next mini will most likely have a retina display and the price remain the same. Retina displays are not only more expensive, they would need a bigger battery and faster powered processor to power them (A5X could do but I think A6 would be more likely). This would increase the cost furthermore, unless they use IGZO displays. I have read somewhere that those are cheaper but I am not familiar with this.
    19 Jan 2013, 01:39 PM Reply Like
  • How come your negative post is dated and timed at 10:43 AM on Friday and cites a Reuters report that was posted AFTER yours at 3:48 PM? Strange.....
    19 Jan 2013, 08:47 PM Reply Like
  • That's because Reuters apparently edited the text after the article was initially published, and updated the timestamp to reflect this. Other news sources such as Bloomberg and the WSJ often do the same.


    Btw, I'd appreciate it if you could admit the prior complaints I took the time to respond to were unjustified before launching a fresh complaint (now also discredited). I consider that simple courtesy.
    20 Jan 2013, 03:38 PM Reply Like
  • OK, I will admit that you did use the words avg gross profit rather than average margin. For that I will acknowledge you were right. So I guess my complaint is that you cherry picked language to portray an negative article.


    Lets face it, if the total overall revenue from the mini and the regular I pad is the same, then Apple will make MORE not LESS money if the mini canibalizes some of the regular I pad. If you replace 100% of the revenue from the regular I pad with the same amount of revenue from the mini, Apple will make MORE not less money. I cant help but think that the gist of the article is misleading.
    20 Jan 2013, 06:03 PM Reply Like
  • Thanks for admitting that. I disagree about the cherry-picking.


    "If you replace 100% of the revenue from the regular I pad with the same amount of revenue from the mini, Apple will make MORE not less money."


    That's quite possible, but for that to happen, unit volumes have to increase, since the Mini's ASP is lower. That's the big question: does the Mini boost total iPad volumes enough to offset the profit impact of any regular iPad cannibalization? This might or might not be true over the short-term, but I think it'll be true over the long-term, given how consumers have taken a liking to smaller tablets.
    21 Jan 2013, 12:56 AM Reply Like
  • I guess it's less offensive to Apple to call it managing inventory rather than say cut production.
    18 Jan 2013, 10:58 AM Reply Like
  • Or it could just be an ipad update in the spring...
    18 Jan 2013, 11:29 AM Reply Like
  • Is there anybody who knows something about Innolux in-cell-technology patented by Apple? These new displays will explain the so called "order cuts" (WSJ) of the "old" display version.
    18 Jan 2013, 05:55 PM Reply Like
  • I think Wallstreet may well interpret the dominance of the mini as the death of the regular, but I believe that the crucial difference between the two is thickness and weight. People love the mini despite it's "inferior" tech specs, because its so light. The ipad 3 was not lighter than the two, the four wasn't either. Once they slim down the entire lineup it will likely fire on all cylinders.
    18 Jan 2013, 12:05 PM Reply Like
  • Agree. I own an iPad 2 and like having the extra screen space, but I was impressed with how much thinner and lighter the Mini was (on top of being smaller) when I tried it out. And for a majority of tablet users, that's a stronger selling point.


    The 5th-gen iPad is supposed to be thinner and lighter, and also have smaller bezels similar to the Mini. That should make it more competitive relative to the Mini.
    18 Jan 2013, 12:24 PM Reply Like
  • with the mini driving greater volume due to price etc
    18 Jan 2013, 12:06 PM Reply Like
  • IPad mini prices go up just as much for the 32G and 64G options which probably sell in higher numbers therefore when stating the number of IPads sold (regardless of mini or standard), it would be good to add the differentials. Apple make an even greater margin on the additional memory.....! Have you considerd this in your "detailed" analysis ?
    18 Jan 2013, 12:14 PM Reply Like
  • As thin as the macbook air has become I think it's only a matter of time before they come out with a tablet version of the macbook air. Once they do that, they will have a productivity device that runs MSFT office in a tablet form. Basically what MSFT is trying to do with their tablets as a differentiator. If AAPL is smart, they will kill that before it happens by coming out with a tablet that is a true computer running office.
    18 Jan 2013, 12:23 PM Reply Like
  • Totally, I'm quite sure Cook et al are way ahead of us!
    18 Jan 2013, 01:00 PM Reply Like
  • @jack baker - very insightful comment as usual. I enjoy reading your perspective and insights. Best of luck with your investments.
    18 Jan 2013, 01:01 PM Reply Like
  • Perhaps a transition to an IGZO screen for the iPad 5 regular size for the new "mini-like" form factor. Leverages the superior power usage of the new tech to mean a lighter big iPad with the same or expanded battery life in a slimmer, lighter more easily portable package. SHARP is ahead in that tech (they showed screens at CES) and APPLE has put money into SHARP.
    18 Jan 2013, 01:43 PM Reply Like
  • Um well, first, in order for this thread to be of any merit, one would need to accept the Reuters story as fact. IMHO it is nothing more than a belated regurgitation of the bogus Murdoch slam from Monday. It is regardless a gross misstatement of unsubstantiated rumors, that have been shown to be decidedly false. Anyone here recall the WSJ citing their own staged tv "interview" as the source for then publishing that AAPL sales were falling short of expectations, hence massive supply cuts?




    Well, of the handful of remaining honest news outlets, those that verify with real sources before publishing as old fashioned responsible journalism requires, they all say the WSJ article was bogus. Even the Journal disavowed their own numbers within hours of publishing. But the infotainment media had already seized their negative AAPL headline and they've kept at it all week. So, this entire discussion of margins, iPad vs iPad mini vs Mac Pro vs Mac Air is ridiculous, driven by Monday's WSJ tripe that somehow refuses to abate. I guess it suits the hedges and naked traders to sustain any instability, but it is dishonest to the point of fraud.


    I am long AAPL and relishing the 23rd. Time to whack the bears. They've more than earned a spanking.
    18 Jan 2013, 04:12 PM Reply Like
  • I am sure that Apple is seeing very strong sales of the mini, and that this is impacting demand for the full-size iPad. However, I think this story needs to be taken with a big grain of salt. There have been lots of reports of a more significant iPad refresh coming this spring: smaller bezel, thinner profile, and possibly also IGZO screen. If that product is coming out in April or thereabouts, you'd expect production of the current generation to wind down over the next month or two.
    18 Jan 2013, 04:33 PM Reply Like
  • looks to me like it probably reflects some cannibalization of ipad sales...but it seems the mini is a more than capable competitor to the samsungs and it could simply be they are reallocating their production and inventory needs (typical in mid january for any company)
    18 Jan 2013, 05:57 PM Reply Like
  • it seems the mini ipad carries a higher gross margin but the regular ipad offers higher gross profits assuming they both sell equally
    18 Jan 2013, 05:59 PM Reply Like
  • One aspect I haven't noticed being discussed in the "newness" factor of the ipad mini relative to sales. It's clear to me there was a pent up demand for a smaller cheaper iPad even before the product was announced. My thesis is that it will take some time for the relative demand between the 2 ipad sizes to reach a somewhat steady state. This could be further impacted by both the retina display for the mini and the smaller case for the iPad not to mention other changes which may occur. My main point is that the relative sales volume between the 2 ipad sizes has not likely reached a longer term equilibrium. I feel that the newness of the mini favors a longer term improvement in the iPad (non mini) share of the aggregate total. That said, I would presume the mini would remain the volume leader due to price (it can establish and remain the volume leader while shrinking it's relative share somewhat from todays level).
    18 Jan 2013, 09:29 PM Reply Like
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