Is Apple’s Supply Chain Under Threat?

Samsung (NASDAQ: SSNLF), one of Apple’s (NASDAQ: AAPL) biggest rivals in the smartphone market, staked a strategic claim in the Cupertino-based company’s supply chain when it made a $112 million investment in Japanese display maker Sharp (NASDAQ: SHCAY) on Wednesday. Although Apple doesn’t disclose details of its supply chains, analysts believe that Apple sources approximately 30 percent of its display panels from Sharp, which makes it Apple’s second-largest supplier of displays.

Although Samsung’s moderate 3 percent stake in Sharp won’t give it much leverage over the company, it may force Apple to rethink the strategic diversification of its supply chain in order to avoid having to rely on Samsung-related companies for components. In fact, as the acrimonious patent infringement trials continue worldwide, Samsung might be inclined to cut Apple’s supply chains for reasons other than shortages at the factories.

Sharp may also see benefits from Samsung’s investment beyond the simple cash infusion. By acquiring another purchaser for its thin-screen displays, Sharp is also acquiring a better bargaining position when negotiating the cost of its supplies with Apple. As reported by Forbes, Apple prefers to keep a tight rein on its suppliers in order to ensure steady supplies and lower prices.