Italy convicts 3 Google execs in abuse video case

MILAN – It seems that when it comes to letting the Web be the Web, it could be the United States against the world.

An Italian judge on Wednesday held three Google executives criminally responsible for an online video of an autistic teenager being bullied — a verdict that raises concerns that the Internet giant, and others like it, may be forced to police their content in Italy, and even beyond.

The reaction to the verdict in the United States was swift and nearly unanimous in its condemnation of a dangerous precedent experts said threatens the principle of a free and open Internet.

However, Milan Prosecutor Alfredo Robledo reflected a European concern with privacy when he expressed satisfaction with a decision he said protected a fundamental right, putting the interests of an individual before those of a business.

"This is the big principal affirmed by this verdict," Robledo said. "It is fundamental, because a person's identity is a primary good. If we give that up, anything can happen and that is not OK."

The charges stemmed from a complaint by Vivi Down, an advocacy group for people with Down syndrome that was named in the 2006 video posted on Google Video, a video-sharing service Google ran before acquiring YouTube later that year.

The footage showed an autistic student in Turin being pushed, pummeled with objects, including a pack of tissues, and insulted by classmates, who called him a "mongoloid."

The prosecutor's case emphasized that the video had been viewed 5,500 times over the two months it was online, when it climbed to the top of Google Italy's "most entertaining" video list and had more than 80 comments, including users urging its removal.

Google argued that it was unaware of the offensive material and acted swiftly to remove it after being notified by authorities, taking the video down within two hours.

Those convicted of violating Italy's privacy laws were Google's global privacy counsel Peter Fleischer, its senior vice president and chief legal officer David Drummond and retired chief financial officer George Reyes. They were given six-month suspended sentences.

They were absolved of defamation charges, along with a fourth defendant, London-based senior product marketing manager Arvind Desikan, who was charged only with defamation. All were charged in absentia and denied wrongdoing.


Google called the decision "astonishing," saying it "attacks the very principles of freedom on which the Internet is built."

While there is no debate that the executives had no role in creating or uploading the video, they were held liable under Italian law as officers of the company.

"The judge has decided I'm primarily responsible for the actions of some teenagers who uploaded a reprehensible video to Google video," said Fleischer, who is based in Paris.

"If company employees like me can be held criminally liable for any video on a hosting platform when they had absolutely nothing to do with the video in question, then our liability is unlimited," he said in a statement.

Drummond said he was "outraged" that he was found criminally responsible for the video, noting that both European Union and Italian law recognized that Internet service providers like Google are not required to monitor content that they host.

"This verdict sets a dangerous precedent," Drummond said in a statement from Google's Mountain View, Calif., headquarters. It also "imperils the powerful tool that an open and free Internet has become for social advocacy and change."

In the United States, the Communications Decency Act of 1996 generally gives online service providers immunity in cases like this, but no such protections exist in Europe.

Google and other hosting platforms generally rely on other users flagging objectionable content. They say the monumental effort it would take to prescreen the 20 hours of video that are posted every minute to YouTube alone makes such controls unthinkable.

In the privacy vs. freedom of expression debate, Europe's championing of privacy has merit, said Carlo Alberto Carnevale Maffe, an Internet economist at Milan's Bocconi University. But he said Europe falls short by "not providing a clear, transparent legal environment."

"Europe is too ideological. This is why we are not the place where Yahoo and Google were born," Maffe said. "Google has been developed with an American mindset, much more entrepenuer-friendly."

Google spokesman Bill Echikson made clear the Internet giant has no intention of pulling out of Italy, as it has threatened to do in China over censorship concerns, noting that Italy "is a democratic society."

Privacy experts warned the Italian decision could embolden authoritarian regimes.


"We are concerned that non-democratic countries will point to it as a precedent for holding companies responsible for hosting content. This could have a chilling effect on free speech," said Ari Schwartz, chief operating officer of the Center for Democracy & Technology in Washington D.C.

The U.S. Embassy in Rome also expressed disappointment in the verdict.

"While we recognize the reprehensible nature of the material, we disagree that Internet service providers are responsible prior to posting for the content uploaded by users," it said in a statement. "The fundamental principle of Internet freedom is vital for democracies which value freedom of expression and is protected by those who value liberty."

Google argued that it removed the video two hours after it received notification from police, which it says is in line with a EU directive that requires it to respond to authorities' requests.

However, prosecutors also suggested during the trial that the company's policy of having users flag material fell short. It is unclear if that argument had sway with Judge Oscar Magi, who will issue his written ruling later.

Eddan Katz, international affairs director of San Francisco-based Electronic Frontier Foundation, argued that the incident itself might have gone unreported if not for the video. That supposition was supported by a statement made to authorities by the autistic teen's father, who expressed anguish at seeing on the video how his son had suffered but hadn't had the courage to tell his family.

Thanks to the footage and Google's cooperation, the four bullies were identified and sentenced by a juvenile court to community service.

Exposing wrongdoing and abuse, Katz said, is a strong argument against placing limits on the Web.

"The implication would be that those videos exposing wrongdoing on the part of government, corruption, or organized crime would not be aired. How do we differentiate between the positive exposure of that kind of information, and the negative?"

Toyota recalls won't 'totally' fix sudden surges

Massive recalls of popular Toyota cars and trucks still may "not totally" solve frightening problems of sudden, unintended acceleration, the company's American sales chief conceded Tuesday, a day before the Japanese president of the world's largest automaker must confront angry U.S. lawmakers.


House members listened in rapt silence Tuesday to the tearful testimony of a woman whose car unaccountably surged to 100 mph, then they pressed U.S. sales chief James Lentz on the company's efforts to find and fix the acceleration problems — actions many suggested were too late and too limited.

Lentz apologized repeatedly for safety defects that led to recalls of some 8.5 million Toyota cars and trucks, and he acknowledged the changes the company is making probably aren't the end of the story.

Putting remaining doubts to rest is of vital importance to millions more Toyota owners in the United States and elsewhere, who have continued to drive but with serious concerns about their cars. Toyota sales have suffered, too, and a small army of dealers showed up on Capitol Hill Tuesday, arguing that this week's high-profile hearings are unfairly targeting their company.

"We are vigilant and we continue to look for potential causes," Lentz told the House Energy and Commerce Committee.

That search had better continue, a number of lawmakers said, openly questioning Toyota's insistence that the problems are mechanical, not linked to the vehicles' sophisticated electronics.

Without a more vigorous investigation of the possibility that electronics are involved, Texas Republican Rep. Joe Barton said of Toyota's probe: "In my opinion, it's a sham."

The U.S. government is pursuing the electronics question, Transportation Secretary Ray LaHood told the panel. "We're going to go into the weeds on that" and come up with answers, LaHood said. He said the company's recalls were important but "we don't maintain that they answer every question."

Lentz's appearance set the stage for Toyota's president — Akio Toyoda, grandson of the company's founder — to apologize in person on Wednesday.

Toyoda will accept "full responsibility" for the halting steps that led to the recall, according to prepared testimony released in advance. He also will offer his condolences over the deaths of four San Diego, Calif., family members in a crash of their Toyota in late August.

"I will do everything in my power to ensure that such a tragedy never happens again," Toyoda will tell the House Government Oversight Committee. "My name is on every car. You have my personal commitment that Toyota will work vigorously and unceasingly to restore the trust of our customers."

"Quite frankly, I fear the pace at which we have grown may have been too quick" and led to safety defects at the heart of the recall, Toyoda says in his prepared testimony.

There were repeated displays of emotion at Tuesday's daylong hearing — both from the Tennessee woman who survived a 2006 sudden acceleration incident when she was unable to control her runaway Lexus and from Lentz himself, who choked up while discussing the death of his own brother more than 20 years ago in a car accident.

"I know what those families go through," Lentz said.

Rhonda Smith, of Sevierville, Tenn., said her Lexus raced out of control to speeds up to 100 miles an hour, and that nothing she did to try to stop it worked — including braking and shifting into neutral. "I prayed to God to help me," she said, fighting back tears.

"After six miles, God intervened" and slowed the car, Smith said. She said she was finally able to pull off the road onto a median and turn off the engine. She said it took a long time for Toyota to respond to her complaints and even then it was dismissive.

"Shame on you, Toyota, for being so greedy," Smith said as Lentz sat grim-faced with other Toyota officials in the first row of the committee room awaiting his turn to testify. She directed a second "shame on you" at federal highway safety regulators "for not doing your job."

"Listening to Mrs. Smith, I'm embarrassed for what happened," Lentz said. Pressed by committee members as to why Toyota had not had its technicians pour over the Smith car to determine what actually caused the malfunction, Lentz said he wasn't sure where the car was now but "We're going to go down and talk to them and get the car so that they feel satisfied. I want her and her husband to feel safe about driving our products."



LaHood, the transportation secretary, told the panel the U.S. government knew the exact whereabouts of the car and would share the information with Toyota. "All of this has been a big wake-up call for Toyota," LaHood said.

Toyota has recalled some 8.5 million vehicles worldwide — more than 6 million in the United States — since last fall because of unintended acceleration problems in multiple models and braking issues in the Prius hybrid. It is also investigating steering concerns in Corollas. People with Toyotas have complained of their vehicles speeding out of control despite efforts to slow down, sometimes resulting in deadly crashes. The government has received complaints of 34 deaths linked to sudden acceleration of Toyota vehicles since 2000.

Congressional panels are asking whether computerized modern automotive electronics designed to make cars more efficient can sometimes make them less safe.

Lentz said that "two specific mechanical causes" were to blame for the sudden accelerations — misplaced floor mats and sticking accelerator pedals. He insisted electronic systems connected to the gas pedal and fuel line were not to blame, based on tests made by the company in the United States and Japan.

Lentz said that, while the company had not expressly ruled out an electronics malfunction, "We have not found a malfunction" in the electronics of any of the cars at issue. He cited "fail-safe mechanisms" in the cars that were designed to shut off or reduce engine power "in the event of a system failure."

But when pressed by Energy and Commerce Committee Chairman Henry Waxman, D-Calif., on whether he could say with certainty that the fixes now being undertaken would completely eliminate the problems, Lentz hesitated a moment and then replied: "Not totally."

Still, he said chances of unintended accelerations would be "very, very slim" once the recalls were complete. Lentz also said Toyota was putting in new controls so brakes would override the gas pedal on almost all of its new vehicles and a majority of its vehicles already on the road.

House investigators who reviewed Toyota's customer call database found that 70 percent of the complaints of sudden acceleration were for vehicles that are not subject to the recalls over floor mats or sticky pedals,

Rep. Bart Stupak, D-Mich., chairman of an Energy and Commerce subcommittee investigating Toyota's recalls, said the company "misled the American public by saying that they and other independent sources had thoroughly analyzed the electronics systems and eliminated electronics as a possible cause of sudden unintended acceleration when, in fact, the only such review was a flawed study conducted by a company retained by Toyota's lawyers."

Tracking down an electrical problem can be far more difficult, expensive and time-consuming than finding a mechanical problem. Electrical problems can have more than one source, and they can come from inside or outside the car. Mechanical problems often leave clues such as physical damage, where electronic troubles can be hidden in software or leave no trace at all.

Stupak suggested a decade-old law intended to give federal regulators more tools to track vehicle safety defects needs to be strengthened.

Lentz told the committee his company had "not lived up to the high standards our customers and the public have come to expect from Toyota."

"Put simply, it has taken us too long to come to grips with a rare but serious set of safety issues, despite all of our good faith efforts," said the president and chief operating officer of Toyota Motor Sales USA. Inc.

Later, outside the briefing room, Lentz was asked by reporters whether anybody should be fired at Toyota.


"Right now I think the main focus is let's get the customers' cars fixed, let's figure out what went wrong. We are going to be a much more transparent company," he said. "We have to go back and regroup top-to-bottom."

He said Toyota had already completed fixes on 800,000 vehicles and that most customers seemed "extremely satisfied."

Meanwhile, more than 100 Toyota dealers lobbied members of Congress Tuesday, questioning the ability of the government to be impartial given its bailouts of General Motors and Chrysler that left it with a majority ownership stake in General Motors and a smaller stake in Chrysler.

"That's hard for me as a citizen to understand why my tax dollars are going in that direction," Paul Atkinson, a Houston-area Toyota dealer, said.

Apple removing risque iPhone apps

Apple has begun removing risque iPhone and iPod Touch applications from its online App Store, including some which had previously been approved for sale, according to reports.



Technology blog TechCrunch and The Wall Street Journal said the new policy towards adult-themed contents had resulted, for example, in the deletion of applications featuring bikini models.

TechCrunch said Apple had begun notifying application developers earlier this week that apps with "overtly sexual content" were being removed.

"If we find these apps contain inappropriate material, we remove them and request the developer make any necessary changes in order to be distributed by Apple," the Journal quoted an Apple statement as saying.

The Journal said the move appeared to be part of an effort by Apple to clean up the App Store ahead of the shipping late next month of its new iPad tablet computer.

The newspaper said the App Store, which offers more than 140,000 programs, will be an important part of the marketing of the iPad, which Apple intends to promote as a device for families and schools.

Privacy group files FTC complaint on Google Buzz

A privacy watchdog group complained to federal regulators on Tuesday about Google's new Buzz social networking service, saying it violates federal consumer protection law.


The Electronic Privacy Information Center filed its complaint with the Federal Trade Commission just days after Google Inc. altered the service to address mounting privacy concerns.

Since launching Google Buzz as part of Gmail a week ago, the search company has come under fire for automatically creating public circles of friends for users based on their most frequent Gmail contacts. Over the weekend, Google altered the service to merely suggest contacts for its users' social networks.

Despite the changes, EPIC argues that privacy violations remain because Google automatically signs up Gmail users for Buzz, rather than waiting for them to do so themselves, or "opt in" for the service. EPIC wants the FTC to require Google to make Buzz a "fully opt-in" service. It also wants the company barred from using Gmail address book contacts to compile social networking lists.

"This is a significant breach of consumers' expectations of privacy," EPIC Executive Director Marc Rotenberg said in a statement. "Google should not be allowed to push users' personal information into a social network they never requested."

But Google insists that it gives users control because, even though it adds a "Buzz" link to all Gmail accounts, users must click on the link and agree to activate the service. Google also gives users the option to disable Buzz.

In response to the EPIC complaint, Google said it has already made some changes to Buzz based on user feedback and has "more improvements in the works."

Samsung unveils new smart phone with own software

Samsung Electronics Co., the largest maker of cell phones for the U.S. market, on Sunday revealed the first phone running Samsung's own "smart" software system, bada.


With bada, Korea-based Samsung is taking the TouchWiz system used on its touch-screen non-smart phones and making it the basis of a smart phone platform to take on Apple Inc.'s iPhone and Research In Motion Ltd.'s BlackBerry. Samsung also makes phones based on other competing smart phone systems: Android, created by Google Inc., and Symbian, of which Nokia Corp. is a major backer.

J.K. Shin, the president of Samsung's phone division, said the goal of bada was to expand the market for smart phones, making them available to people across the world who have made do with non-smart phones.

The new phone, dubbed the Wave, is a touch screen phone like the iPhone. It features a highly saturated, high-resolution screen using organic light emitting diodes, or OLEDs. Samsung said the phone will go on sale in April, but did not say if the U.S. would be one of the launch markets, nor did it say what the phone would cost.

To support the Wave and existing phones using TouchWiz, Samsung is launching online applications stores in 50 countries this year, including the U.S. Most major phone makers now operate applications stores, or make phones that use stores administered by others, like Google.

Samsung revealed the phone in Barcelona a day ahead of the start of Mobile World Congress, the world's largest cell phone trade show.

Electronic Arts shares dive on weak outlook

A disappointing outlook from Electronic Arts Inc. sent shares of the video game publisher sharply lower Monday, a sign that significant cost-cuts and layoffs have not ended the company's slump.


The company, whose games include the popular "Madden" series and "Mass Effect 2," said Monday it narrowed its net loss in the last quarter even as game sales declined. It blamed the revenue falloff on having fewer titles than it did in the 2008 holiday period. EA also cited weak sales in Europe, which accounts for about a third of its revenue.

The results for the October-December period were not a surprise, because EA had warned in January it would miss forecasts, leading analysts to lower their estimates.

The company lost $82 million, 20 cents per share. In the same period a year earlier it lost $641 million, $2 per share.

Revenue fell 25 percent to $1.24 billion.

Accounting for deferred revenue in games with online components, EA earned 33 cents per share, down from 56 cents per share a year earlier. Analysts were expecting 31 cents, according to Thomson Reuters.

But the company gave a forecast below Wall Street's expectations for the current quarter, even though it is launching several big-name titles during the period. One is the science-fiction epic "Mass Effect 2." Chief Financial Officer Eric Brown said in an interview the game has sold 2 million copies so far. EA ran its first-ever Super Bowl ad Sunday to promote the upcoming "Dante's Inferno."

For the fiscal fourth quarter ending March 31, EA is forecasting a profit of 2 cents to 6 cents per share on an adjusted basis, on revenue of $800 million to $850 million. This is below average analyst estimates of a profit of 13 cents per share on sales of $851 million.

CEO John Riccitiello said in a conference call with analysts EA decided to be "a little bit more conservative" than others that have given guidance for the year. With a strong lineup of games, he added, "there is reason to be optimistic. We have just chosen not to."


Shares of EA, which is based in Redwood City, Calif., fell $1.48, or 8.5 percent, to $16 in extended trading after the earnings report.

EA said in November it was cutting its work force by 17 percent, or 1,500 people, as it tries to align its business with transformations in the industry. Game development costs are skyrocketing, forcing publishers to sell blockbuster amounts of games to justify the expenses. In turn, EA is creating fewer games — cutting out projects it is less certain can become big hits.

"They are certainly not passing through all of the cost savings," Wedbush Morgan analyst Michael Pachter said in a telephone interview.

Third-quarter operating costs declined 33 percent to $696 million.

The October-December quarter capped a rough year not just for EA but for the entire video game industry. Once dubbed "recession resistant," the latest sales for video games suggest otherwise. Americans spent $19.7 billion on video game software and systems last year, according to the NPD Group, a 8 percent decline from a record-setting 2008. Shoppers were picky. They came out in droves to buy Activision's latest "Call of Duty" and many of Nintendo's titles. EA, meanwhile had no games among the top 10 best-selling console titles in 2009, according to NPD, though "The Sims 3" was the year's No. 1 PC game.

Besides lackluster sales and a decline in consumer spending, EA is also dealing with the changing ways people consume — and pay for — games.

Instead of spending $60 on a shiny new disc, many people are playing free or cheap games online, on their mobile devices and on Facebook. They are spending a few dollars here and there to buy virtual add-ons for the games, or they are signing up for subscription-based online games.

EA has been aggressive about such new revenue streams, and last year bought Playfish Inc., a maker of online social games, for $275 million. While digital content still is a small part of EA's business, the company's ability to master online gaming could determine the shape the company is in when game discs go the way of CDs. Adjusted digital revenue grew 30 percent during the third quarter, hitting $152 million.

Google complaint highlights China-based hacking

Google's accusation that its e-mail accounts were hacked from China landed like a bombshell because it cast light on a problem that few companies will discuss: the pervasive threat from China-based cyberattacks.

The hacking that angered Google Inc. and hit dozens of other businesses adds to growing concern that China is a center for a global explosion of Internet crimes, part of a rash of attacks aimed at a wide array of targets, from a British military contractor to banks and chemical companies to a California software maker.

The government denies it is involved, and it reiterated that on Wednesday. Speaking in Paris, China's foreign minister, Yang Jiechi, said China itself "is the victim of pirate attacks" and the international community must fight the phenomenon together.

But experts say the highly skilled attacks suggest the Chinese military, which is a leader in cyberwarfare research, or other government agencies might be breaking into computers to steal technology and trade secrets to help state companies.

"Chinese hacking activity is significant in quantity and quality," said Sami Saydjari, president of the consulting firm Cyber Defense Agency and a former U.S. National Security Agency official.

Officials in the United States, Germany and Britain say hackers linked to China's military have broken into government and defense systems. But attacks on commercial systems receive less attention because victims rarely come forward, possibly for fear it might erode trust in their businesses.

Google was the exception when it announced Jan. 12 that attacks hit it and at least 20 other companies. Google says it has "conclusive evidence" the attacks came from China but declined to say whether the government was involved.

Google cited the attacks and attempts to snoop on dissidents in announcing that it would stop censoring results on its China-based search engine and leave the country if the government does not loosen restrictions.

Only two other companies have disclosed they were targets in that attack — software maker Adobe Systems Inc. and Rackspace Inc., a Web hosting service.

Mikko Hypponen, chief research officer at Finnish security software maker F-Secure Corp., said his company has detected about two dozen attacks originating from China each month since 2005.

"There must be much more that go completely undetected," he said.

Hypponen said a large British military contractor with which his company worked discovered last year that information had leaked for 18 months from one of its computers to an Internet address in the Chinese territory of Hong Kong. He said similar attacks on military contractors were found in Germany, the Netherlands, Sweden and Finland.


Saydjari said other researchers have told him of dozens of U.S. companies that have been attacked from China but said he could not disclose their names or other details.

A key source of the skills required might be China's military. China's army supports hacker hobby clubs with as many as 100,000 members to develop a pool of possible recruits, according to Saydjari.

"China has a strategic goal of becoming the world-dominant economic power within this century. Certainly one way to do that faster is to steal industrial secrets," he said.

There are no estimates of losses attributable to hacking traced to China, but antivirus supplier McAfee Inc. says intellectual property worth an estimated $1 trillion was stolen worldwide through the Internet in 2008.

Separately, a Los Angeles law firm says it was hit Jan. 11 by an attack that appeared to originate in China after it filed a lawsuit for CyberSitter LLC, a software maker that accuses the Chinese government of stealing its code for use in a Web-filtering system.

The firm Gipson Hoffman & Pancione said e-mails sent to its lawyers contained malicious software designed to extract information from their computers.

Security firm Mandiant Corp. has dubbed such attacks — which allow repeated thefts over months or years — an "advanced persistent threat" and says each one it has studied over the past five years involved theft of information related to U.S.-China corporate acquisitions, negotiations or military acquisitions.

"The scale, operation and logistics of conducting these attacks — against the government, commercial and private sectors — indicates that they're state-sponsored," the company said in a report last month.

But even if an attack is traced to China, experts need to examine the computer used to be sure it was not hijacked by an attacker elsewhere. Consultants say security for many Chinese computers is so poor that they are vulnerable to being taken over and used to hide the source of attacks from elsewhere.

In the Google case, confirming the source would require China's cooperation, and Beijing has yet to respond to U.S. Secretary of State Hillary Rodham Clinton's appeal for an investigation.

"The 'smoking gun' proof is very hard to put together," said Graham Cluley, a researcher for Sophos, a British security software company.

China's Industry Ministry said in a statement that any suggestion the government is involved in any Internet attack "is groundless and aims to discredit China."

But China is no stranger to government-directed industrial espionage on a vast scale.

Intelligence experts say that since the 1970s, Beijing has carried on a quiet campaign to acquire foreign technology and other secrets by using Chinese businesspeople, students and scientists who travel abroad as part-time spies.

China, with the world's biggest population of Web users at more than 384 million, also has a history of hacking. In 1999, Web surfers defaced U.S. government sites after the mistaken American bombing of Beijing's Belgrade embassy killed three Chinese. Nationalists have attacked Web sites in Japan and Taiwan, the self-ruled island claimed by Beijing as its own territory.

More recent cases have shifted from vandalism to theft of government or trade secrets.

Last March, a Canadian group, the Information Warfare Monitor, said it found a China-based ring stole sensitive information from thousands of computers worldwide. Targets included the communications network of The Associated Press.

The government did not respond to the report's details but said it opposes computer crime and criticized the researchers for suggesting otherwise.

China has also ordered vendors that sell computer security technology to government agencies to reveal how it works under rules that take effect on May 1. Foreign companies operating there worry that might compromise systems used by banks and others to protect customer information and trade secrets.

Beijing is also pressing foreign financial firms to move more of their computer servers into China. That might require a switch to Chinese-made equipment with weaker protections.

Asian companies hope to reap iPad boom

The iPad may have been designed in the United States, but Apple's money-spinning products are manufactured in the high-tech factories of east Asia.

If the new tablet computer follows the iPhone and iPod by capturing the imagination of consumers around the globe, component makers in Taiwan, China and South Korea will reap the benefits.

"The iPad is likely to stimulate global demand for high-tech products and components," said James Chen, the vice president of Taiwan-based display and touch panel maker Wintek Corp.

Confidentiality agreements between Apple and its suppliers means no company is willing to openly discuss who does what, but analysts are free to make informed guesses.

Wintek is widely seen as a likely supplier of iPad parts, although Chen declined to either confirm or deny the company's involvement.

The new touchscreen device, which was unveiled Wednesday, seeks to establish an entire new category between laptop and smartphone, but it does so by combining well-known components, most of them produced in Asia.

While the touchscreens are widely thought to be made by companies like Wintek, the chips are likely to come from companies such as Japan's Toshiba and South Korea's Samsung Electronics.

South Korea's LG Display is named as a probable supplier of the displays, while Taiwan's Hon Hai Precision Industry, a veteran Apple supplier, is believed to be in charge of assembly.

"In Taiwan, I expect Hon Hai will become the biggest beneficiary of Apple's iPad," said Mars Hsu, a Taipei-based analyst with Grand Cathay Securities.

Hon Hai Precision was not immediately available for comment.



However, an official at Innolux Display, Hon Hai Precision's flat panel manufacturing arm, told AFP on condition of anonymity that the company will try its best to team up with Apple in the production of the iPad.

Meanwhile, Simplo Technology and Dynapack, both of Taiwan, have been major battery pack providers for Apple in the past, and they could maintain their role, Taiwan's Capital Securities said in a report.

"They've already served as component suppliers to Apple's iPhone. That means they've reached economies of scale and enjoy cost advantages," said Taiwan International Securities analyst Michael Chiang.

But on the big question -- how much money the iPad will make for the suppliers -- the jury is still out.

An official with South Korea's LG Display said the latest Apple device was likely to revitalise the market as a whole.

"The iPad will help increase demand for new components," he said on condition of anonymity.

Also among the optimists was Taiwan-based Topology Research Institute, which this week raised its 2010 forecast for iPad sales to seven million units from five million previously.

In a statement, Topology said it based its higher forecast on iPad's pricing strategy, with the cheapest version costing as little as 499 US dollars.

However, TLG Asset Management analyst Arch Shih said it was too early to say how much iPad will do to lift contract makers' profitability.

The reason is the global economic outlook, with further volatility in US securities markets threatening to spill over into the real economy, he said.

"A market pullback could impact global demand for high-tech products. At the moment, I'm cautious about iPad sales," Shih said.