IGZO – An Alternate Explanation for Apple Cancelling Display Orders, and Great News For Apple Stock

In December, many Apple analysts and reporters wrote notes of panic based on reports that Apple was canceling display orders for IOS devices in the first quarter of 2013.  This was a major contributor to the collapse in Apple’s stock price, and when the Wall Street Journal reiterated the story on January 14, the sell-off in Apple stock continued.

Here is an alternate view – one that if true suggests this is a strong buying opportunity for Apple stock.

When I attended the Consumer Electronics Show on January 8, the most impressive innovation I saw was only minimally discussed by the extensive press coverage of the show.  It was Sharp’s IGZO display technology.  IGZO stands for Indium gallium zinc oxide, and serves as the channel for a transparent thin-film transistor. It replaces amorphous silicon for the active layer of an LCD screen, and with forty times higher electron mobility than amorphous silicon, it allows either smaller pixels (for screen resolutions higher than HDTV) or much higher reaction speed for a screen – translating to better battery life.  Sharp has been reported to be working with Corning’s Gorilla Glass group, and of course Gorilla Glass is already being used in iPhones and iPads. Sharp is also reported to be one of Apple’s three display providers (along with LG Displays and Japan Display Co.)

For mobile products using IGZO, this delivers more than 80% improvement in power consumption, which translates to smaller batteries, less weight, thinner devices and the ability to incorporate retina displays in devices such as the iPad mini without making them thicker or heavier. This is a hugely important benefit – and a real breakthrough. Apple has been reported to be in discussions with Sharp about IGZO for a long time, but the combination of 1) Sharp now indicating they can scale production and 2) Apple’s desire to drop Samsung as a component supplier, gives further motivation for Apple to make the switch as soon as possible. If that time is now, it would also explain the rumors of an earlier spring/summer iPhone 5S and a spring launch of new iPads including a retina display iPad mini. On top of all this, at CES Corning announced Gorilla Glass 3, which with Native Damage Resistance (NDR) brings a three-fold improvement in scratch resistance, 40 percent reduction in the number of visible scratches and 50 percent boost in retained strength after the glass becomes flawed. If these technologies are as ready for production as Sharp and Corning are indicating, Apple will not want to wait until late 2013 to incorporate both into their products.

This is the most plausible explanation I can imagine for the reports of display order cancellations, and it all comes together in a Eureka moment.  Rather than cause for panic that demand is inadequate for Apple IOS devices, the cancelling of orders of the “old” technology displays instead indicates that there might be a wave of new products hitting the market sooner, a prospect that is not currently in the market’s expectations for Apple revenue and profits. Coupled with the sell-off in Apple’s shares, it is a compelling reason to buy, not a reason to sell.