Chimei Innolux (CMI) may see more obstacles to becoming a regular LCD panel supplier for the iPad, as Apple reportedly is working out a deal with Sharp to secure supply from Sharp.

A note from MF Global FXA Securities for its clients on August 17, 2011 claimed that Apple would invest US$1 billion in Sharp's Kameyama factory to ensure a safe supply of LCDs for the iPad and iPhone.

But other industry observers in Taiwan said that it is more likely for Apple to pay Sharp US$1 billion in advance payments for panel purchases, rather than invest in the Japan maker. The observers' argument is based on the way in which Apple has worked with LGD.

But tighter collaboration between Apple and Sharp means that the US vendor might rely less on Samsung, as well as CMI, which has just begun supplying IPS panels for the iPad 2, the observers said.

LG Display (LGD) has been the major supplier of iPad panels, some of which have also been coming from Samsung and CMI. But recent quality issues with LGD's panels have prompted Apple to shift more of its panel orders to Samsung and CMI, the observers claimed.

CMI, aiming to become a regular supplier for Apple, is ramping up 9.7-inch panel production with a monthly output of nearly one million units, the observers said.

But CMI still needs to stablize the quality of its IPS panels and enlarge production capacity in order to stand a chance of winning more orders from Apple.