Apple's Profit Margins Shrink as It Looks to Taiwan for Supplies

If you haven't heard, things aren't looking very good in northern Japan right now. The 9.0-magnitude earthquake that devastated the region also sent Apple, one of the biggest purchasers of the country's tech-related products into a frenzy. "Apple is scrambling to retool its supply chain following" the earthquake, according to All Things Digital's John Paczkowski. The company is "searching out new suppliers to avoid running out of components as demand for the iPad 2 surges."

With reports of long lines and rapidly-selling stacks of iPads coming from all over the world (last Friday, the newest iteration of the popular tablet was officially released in 25 countries), Apple is going to have to place some big orders -- and quick.

For the first time ever, Taiwan's AU Optronics has been tapped by the company to provide panel displays for the iPad 2. "Market players estimate that the Apple order could amount to 100,000 pieces daily, or 30 million a year, about half of the demand in the global tablet-PC market," Taiwan's Economic Daily News reported. That's 30 million units/year that Apple is going to have to pay considerably more for than it had planned. "The demand will give a strong boost to AUO in both sales and profits," according the Daily News, "since price offered by Apple is three to four times the going price for displays of the same size."

Apple's deal with AUO requires the company to set aside about half of the capacity of its plant in Taichung. The 9.7" displays will continue to come from LGD and Samsung, two other major suppliers, as no one company seems able to meet the demand for Apple's products. The Daily News article suggests, though, that Apple could soon end its relationship with Samsung as the company will release its own tablet intended to compete directly with the iPad 2 in the second quarter.