Apple Rival Morphs into Screen Supplier

The Apple iPhone had its 10th anniversary this summer, and amid the celebration there is much speculation about the new line of phones to be released this fall. Among the rumors is the question of delay on the shipment due to the new features to be built into the next iteration of iPhone.

Image courtesy: Apple

Image courtesy: Apple

The most visible of those features is a new type of screen for iPhone. An organic light-emitting diode (OLED) display delivers crisp images on a thinner screen that drains less battery power.  The supplier of that screen technology is Samsung Display, a division of the Korean company Samsung, which, yes, does manufacture its own phones. 

Apple has already incorporated OLED into other products, like the Apple Watch.   However, it had not yet put it into its biggest seller, the iPhone, which accounts for over 60% of the company’s revenues. That’s why the shift in screen is such a significant move. Nevertheless, it is not to be a sweeping change that affects all new iPhones released this year.  

Nikkei Asian Review  anticipates the possibility of three new phone models to be released later this year in different price points. The deluxe model that could have a price tag of 4 figures is the one that would feature a 5.2-inch OLED screen that may be curved. But the other two models, one with a 4.7-inch screen and one with a 5.5-inch one, are expected to feature the liquid crystal display flat screens that Apple has been using until now.

However, the screen conversion is expected to be complete in 2018. Next year, Apple does plan to include OLED in all its phones, according to Fortune. That would jibe with the report from Digitimes that Apple entered into a two-year agreement worth $9 billion for Samsung Display to supply OLED panels for phones.  

This is an t unusual move for Apple, both because it is becoming a customer to a rival company and because it usually prefers to work with various suppliers rather than depending on one for something as essential as definitive as a phone screen. As the sole supplier of OLED panels for Apple, Samsung is gearing up to prepare as many as 95 million of them this year, according to Nikkei Asian Review.

 It quoted David Hsieh, senior director at research company IHS Markit: “Apple has ordered 70 million units of OLED panels from Samsung this year, while Samsung is preparing to churn out as many as 95 million for Apple in 2017, in case demand exceeds expectations.”

Given that Apple produces about 200 million phones a year, those figures assume that over 35% of the total iPhone market would be devote to the 2017 model that is set to include OLED panels.  That is possible, and Samsung appears to consider it probable.  It is clearly optimistic about the rise in demand for its panels.

Accordingly, Samsung plans to build the biggest OLED plant in the world. ET News reports that the new plant is anticipated to have the capacity to produce at least 30 percent more output than any of Samsung’s existing plants.  The cost of the plant itself is to exceed $1.75 billion, but that amount is a fraction of total costs given that the equipment required to turn out 180 thousand panels each month entails an investment of $14 billion. That’s on top of the $20 plus billion it would take to increase production at two of its existing plants.

As the supplier for Apple, Samsung is in a good position to make such investments in increasing production. But it should bear in mind that it may not hold that positon for very long.

Apple is working with screens that even more advanced than OLED. In June, Nikkei Asian Review reported that “Apple is planning to adopt advanced micro-LED display technology in its wearable devices” as soon as next year.

While the cost of micro-LED displays makes them too expensive to use in iPhones now, Apple may be find a way to make it feasible down the road. Working through the application of new screen technology on things like the Apple watch that had been based off OLED screens may signal Apple’s plan to build up independence from Samsung.  If that is the case, then Apple may be able to cut Samsung out of its supply chain in the future.  

2 comments on “Apple Rival Morphs into Screen Supplier

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    October 16, 2018

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