Report: Apple to absorb quake costs

March 31, 2011: 10:53 AM ET

Paying whatever it takes to ramp up to a reported ship rate of 4 million iPads per month

Natori City in northeastern Japan. Photo: REUTERS/KYODO

Here's what Apple COO Tim Cook might call another "fantastic use" for the company's nearly $60 billion cash reserves.

According to a report Thursday in DigiTimes, the Taipei-based daily that is a rich source of electronics supply-chain rumors, Apple (AAPL) has agreed to absorb all the additional component costs created by the Japanese earthquake and tsunami and the resulting factory brownouts.

If true, this could have two effects:

  • It would mean that Apple's upstream component suppliers -- the companies that have to pay for those Japanese chips, batteries, touch screens and other parts -- would see their profitability "undamaged," as DigiTimes puts it.
  • It would mean that Apple's competitors, whose pockets might not be deep enough to make such a guarantee, would either have to swallow the extra costs or pass them on to consumers -- increasing Apple's already sizable advantage in the rapidly growing market for tablet computers.

DigiTimes' sources also report that iPad 2 shipments are expected to reach 4 million units per month this quarter, provide Apple doesn't run short of parts. According to these sources, the Japanese companies that supply such parts as anisotropic conductive films (ACF) and indium tin oxide (ITO) materials --  have enough inventory to last until May, but may not be able to sustain supplies until June.

Also on Fortune.com:

[Follow Philip Elmer-DeWitt on Twitter @philiped]

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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