How Much Will Suppliers Gain from iPad 2 in 2011

Apple’s (NASDAQ:AAPL) iPad 2 got off to a great start during the first weekend of its launch, selling an estimated 400,000 to 500,000 units. ^[1] Apple holds a substantial lead in the tablet market over competitors like Research in Motion (NASDAQ:RIMM), Motorola Mobility (NYSE:MMI), Samsung, Dell (NASDAQ:DELL) and LG.

How Much Will Suppliers Benefit from iPad 2 Sales in 2011?

Here we take a look at how much various iPad 2 component suppliers stand to gain from the product’s success. We assume here that Apple will continue to source iPad 2 components from the same set of suppliers throughout 2011.

The chart below illustrates our analysis of the revenues various suppliers could earn from the iPad 2 during 2011. ^[2] The right hand side of the chart highlights certain components that go into the iPad 2. Interestingly, although LG and Samsung find it difficult to compete directly against Apple’s iPad, they stand to gain the most from iPad 2’s success.

We maintain a $420 price estimate for Apple stock, which is about 25% higher than market price.

Apple Could Sell Around 20 million iPad 2 in 2011

We estimate that Apple could sell around 24 million iPads in 2011. However, since the iPad 2 was released in March 2011, the number of iPad 2 unit sales might be closer to 20 million.

See our full analysis and $420 price estimate for Apple

LG Display Will Benefit Most

We estimate that LG Display will earn around $2.5 billion from the iPad 2 in 2011. LG supplies display and touchscreen interface components for the iPad 2 that cost around $127. ^[2] Based on our estimate of 20 million iPad 2 units sold in 2011, we have arrived at the estimate of $2.5 billion revenues for LG Display from the iPad 2 in 2011.

Samsung Supplies Key Components

We estimate that Samsung will earn around $1.6 billion from the iPad 2 in 2011. Samsung supplies NAND Flash memory and DRAM, A5 processor and LCD timing controller components for around $66, $14 and $1 respectively as per our estimates. ^[2]

Simplo Technologies Provides the Batteries for the iPad 2

Simplo Technologies supplies batteries for the iPad 2 at a price of around $25. ^[2] Hence, we estimate that the company will earn around $490 million through iPad 2 sales in 2011.

Broadcom Supplies the Bluetooth, Wi-fi and Touch-Screen Control Components

We estimate that Broadcom earns around $9 from Bluetooth/Wi-fi components, $3.7 from touch-screen control and $2.6 from GPS components. ^[2] The key takeaway here is that Broadcom supplies the GSM based GPS components, while Qualcomm (NASDAQ:QCOM) supplies the CDMA-based GPS components. We estimate that CDMA penetration of mobile phones is around 40% as of 2010, a ratio that we have also applied to our iPad 2 estimates.

Based on these numbers, we estimate that Broadcom will earn around $280 million in revenues from the iPad 2 during 2011.

Infineon Supplies the Baseband, Radio Frequency Transceiver and Power Amplifier

We estimate that Infineon (now acquired by Intel (NASDAQ:INTC)) earns around $14 from each GSM based iPad 2 sold by supplying baseband chipsets, RF transceivers and amplifiers. Hence we estimate that Broadcom will earn around $190 million from the iPad 2.

Qualcomm Benefits from CDMA-Based iPad 2 Components

Qualcomm supplies the CDMA-based GPS components, baseband chipsets, RF transceivers and amplifiers for the iPad 2, translating to roughly $110 million in revenues from the iPad 2 alone in 2011.

1. Estimations based on Piper Jaffray survey, March 13th 2011 [↩]
2. Data assembled from the teardown analysis of iPad 2 done by iSuppli, March 2011 [↩] [↩] [↩] [↩] [↩]