June 12, 2011 in Business

Apple surpasses HP as largest chip buyer

Peter Svensson Associated Press
 

NEW YORK — Driven by the success of the iPhone and iPad, Apple Inc. has become the world’s largest buyer of chips for computers and phones, a research firm says.

Apple bought $17.5 billion worth of chips last year, surpassing computer maker Hewlett-Packard Co. as the largest consumer, IHS iSuppli said last week. That was an increase of 80 percent from the year before, reflecting Apple’s continuing sales surge.

An iPhone contains about $80 worth of chips, according to iSuppli. The chips include the central processor that acts as the brains of the device, radio chips that let it talk to cell towers and the audio chip that converts the owner’s voice into a stream of data.

The finding that Apple is the No. 1 buyer cements its standing as a company that has the clout, and the cash, to buy chips and other crucial components such as touchscreens when other companies struggle because of supply constraints.

As an example, Apple said in January that it had spent $3.9 billion on long-term contracts to secure supplies for the next two years of a “very strategic” component it wouldn’t name. Few other companies are able to commit that much money.

Last summer, high-tech manufacturers were scrambling to buy chips as sales started reviving after the recession and chip-makers had yet to ramp production back up. But Apple reported no chip supply problems; it blamed shortages of iPhones and iPads instead on limited assembly-line capacity.

IPhones and iPads use large amounts of expensive flash memory, accounting for much of Apple’s chip consumption. Apple sold 48 million iPhones last year, up 89 percent from the previous year. Meanwhile, PC industry sales grew 14 percent.

The $17.5 billion figure means more than a third of Apple’s “cost of revenue” — expenditures excluding corporate overhead — went toward chip purchases last year.

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