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Apple Inc. (AAPL): Will It Roll out Its iTV to Occupy Your Living Space?

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“When I go into my living room and turn on the TV, I feel like I have gone backwards in time by 20 to 30 years. It’s an area of intense interest. I can’t say more than that.” Apple Inc. (NASDAQ:AAPL) CEO Tim Cook said that in an interview. The Cupertino company is known for dropping hints rather than confirming its upcoming releases, as the tech giant prefers to keep its consumers guessing until the last moment. According to Digitimes, there is a possibility that the long rumored iTV will roll out in the next 12 months. Will the highly anticipated iTV be the next big release for Apple?

Fixing the Supply Chain

As per Digitimes, Apple Inc. (NASDAQ:AAPL) is facing the issue of finding a reliable mass producer for the 4K Ultra High Definition (UHD) screen that the iTV is said to feature. Now arranging a dedicated panel producer is slightly difficult. Firstly, the majority of the UHD panel makers are based in Taiwan and are already booked to meet the demand of Chinese TV vendors. Secondly, Apple Inc. (NASDAQ:AAPL) has its own set of panel suppliers, but they are already occupied with the high resolution panel production for iPhones and iPads.

Apple Inc. (AAPL)

As per speculation, Apple has been in negotiation with old supply chain partner Foxconn’sChief Terry Gou regarding the possibility of making the required display for its TV. There is a good chance that the two would partner as Foxconn lately bought a panel manufacturing unit in Sakai, Japan. This new plant could easily absorb a mammoth Apple Inc. (NASDAQ:AAPL) order and take a bulk load of manufacturing the large display.

Simultaneously, sources have also hinted Apple Inc. (NASDAQ:AAPL)’s inclination to pitch in LG Display Co Ltd. (ADR) (NYSE:LPL), which already provides display for several offerings of Apple including the iPad and Mac Pro computer. An anonymous source told Digitimes that the company is heavily relying on LG, and if the display provider has sufficient inflow of the required technology, the iTV would hit as soon as this year’s end. Conversely, the tech giant also has the option of splitting the total work order between Foxconn and LG rather than depending on any one, particularly as LG earlier failed to meet the cutoff dates and match up with the massive demand of iPad and iPhone screens.

Once the UHD panel supplier is set, Apple Inc. (NASDAQ:AAPL) can take pride in delivering four times the pixel count that 1080p HDTV sports by offering a 3,840-by-2,160 pixel display. The Apple TV is also said to possess voice and motion command together with Internet connectivity. LG and Samsung Electronics Co., Ltd. (KRX:005930) have flaunted their 4K panels that carry exorbitant price tags way above the mass reach. Though Apple would also keep a high price for its iTV, it would offer a unique experience.

Diversification – Is it the Need of the Hour?

The smartphone and tablet market is facing fierce competition. The smartphone segment is ruled by Google Inc’s (NASDAQ: GOOG) Android,  which is taking a lead over Apple’s premium-priced iPhones. Penetration in the emerging markets is much easier for low-priced, high-value Android phones where iPhones have lagged behind due to high pricing. The smartphone war seems to be endless between Apple and Samsung.

The release of the Samsung Galaxy S4 has overshadowed the iPhone 5 on several fronts. The Android smartphone provides unique software features ranging from widgets and customizable home-screens to applications like Group Play and S-Translate. On the other hand the iPhone 5, powered by iOS 6, is user-friendly, quick and responsive, but not very customizable and lacks widgets and live wallpapers. Also the Google Play Store is much more open than the App Store, which is stricter. While the openness of Google Play Store benefits users by allowing them to download free apps including games and office applications, App Store may assure quality. Still, the application approval process is more stringent and much slower.

Similarly, the tablet market, led by Apple, is being explored by numerous players. Android tablets have shaken Apple’s kingship in this arena as well. As per International Data Corporation (IDC) analysis Apple’s iPad dominance will be challenged by the Andoid-based tablets, which experienced remarkable expansion in market share in 2012.

According to the study, Apple’s market share is expected to come down from 51% in 2012 to 46% in 2013 and further down to 43.5% by 2017. On the other hand, Android is expected to take over at 48.8% in 2013 and settle down at 46% in 2017. Google Nexus 7 or Amazon’s Kindle Fire HD come at a lower price compared to the iPads. Apple always keeps its products priced high to ensure quality and profit margins, while Google’s strategy is to keep prices more affordable.

The Bottom Line

Rising competition in the smartphone and tablet markets calls for Apple to come out with an entirely new product, such as the iTV or the rumored iWatch. Widening its product line by offering the iTV would not only add a new line of revenue flow, but would also make the company part of a big market. Undoubtedly Apple would be able to charge premium prices for the iTV, given its brand value, and keep its profit margins higher than industry standards. The iTV is rumored to come in different sizes along with the voice control Siri application.

The company hasn’t come out with anything new since the launch of the iPad, and the iTV rumor is nothing new. Whether or not the tech giant will enter this space remains to be seen, but one thing is for sure: Apple does have a soft spot for revamping the television experience, as even Steve Jobs expressed his inclination ‘to create an integrated television set that is completely easy to use.’

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