“Sharp was in serious trouble last summer,” Philip Elmer-DeWitt reports for Fortune. “It had hemorrhaged 103 billion yen ($1.3 billion) in cash in the first half of 2012. It had another has 200 billion yen ($2.3 billion) in convertible bonds coming due in 2013. And an emergency infusion of cash from Foxconn had just fallen through.”

“This was a problem for Apple (AAPL), because it was counting on Sharp to supply touchscreen displays for the new iPhone 5 scheduled to launch in a few weeks. August came and went and the displays from Sharp were AWOL,” P.E.D. reports. “Then, in the second week of September, the Wall Street Journal reported that mass production of Sharp’s LCD screens for Apple had finally begun.”

P.E.D. reports, “What happened? Asymco’s Horace Dediu has a theory…”

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Horace Dediu writes for Asymco, “There is evidence that at least some of the $2.3 billion over-budget was unanticipated and came late in the year. We saw the surge in spending in FQ4 from the gross asset value change data. The question is what was it spent on and why did it not go through the cash flow statement?”

“Circumstantial evidence points to the asset being production equipment (or even a whole plant) previously owned by Sharp. Sharp is a key supplier of screens to Apple but is also in financial distress,” Dediu writes. “Sharp has also been the object of an intended investment by Foxconn [Hon Hai]. That deal fell through as Sharp’s finances deteriorated. My guess is that these attempts to shore up Sharp are directed by Apple to ensure both continuity of supply and a balanced supplier base (offsetting Samsung, another supplier.)”

Dediu writes, ” I further believe that the financing for this deal was done through a swap of ‘pre-orders.’ Stepping even further into the hypothesis, I believe Apple arranged to move a Sharp screen production line onto its books and “paid” for it through a pre-payment of components. This being a pre-payment it would be in the form of an ‘off balance sheet’ commitment. Apple reported that ‘As of September 29, 2012, the Company had outstanding off-balance sheet third-party manufacturing commitments and component purchase commitments of $21.1 billion‘ [my emphasis]. This is a significant increase from earlier years and allows for a huge ‘slush fund’ to cover asset swaps.”

Read more in the full article here.

MacDailyNews Take: As we’ve consistently been saying for years now, the less business Apple does with Samsung, the better. Apple has billions upon billions of dollars. They can build or help others build anything they want in order to supply Apple with whatever components they need.