​Samsung Display (pvt) has committed to OLED in a big way, ending its many years of large panel LCD production.  The company’s OLED focus has made it the leader in RGB panel production for smartphones, but as OLED became dominant in the small panel market SDC realized that it could not maintain it singular dominance in that space as competition from China increased.  To that end, SDC is building RGB Gen 8.6 capacity specifically designed for the production of larger OLED panels for IT products, such as tablets, monitors, and notebooks.  There are a number of manufacturing challenges that make this expansion more than just adding capacity as the deposition equipment has to be specially designed and processes have to be modified to make such a change, but as is typical of SDC, they are willing to take the risk to become the leader.
China’s leading panel producer BOE (200725.CH) understands that while it continues to produce large panel LCD displays, it must compete directly with SDC in this emerging space and has begun construction of its own Gen 8.6 OLED for IT fab and Visionox (002387.CH), a smaller Chinese OLD producer has begun the planning for OLED for IT capacity.  This leaves one major panel producer, LG Display (LPL), with no announced plans for such expansion, despite its close relationship with Apple (AAPL), who is expected to drive OLED IT demand as it transitions its product line to OLED over the next few years.
LG Display already produces OLED for IT panels on a Gen 6 line and was the first producer to develop the tandem display structure that Apple uses for the iPad, but it does this production on a Gen 6 line, which makes it less efficient than a Gen 8.6 line would be.  This has caused considerable speculation about why LG Display has not committed to building a dedicated Gen 8.6 OLED for IT line to compete with rivals SDC and BOE.  Much of the speculation was based on LG Display’s financial situation, which has been strained over the last few quarters, but with the sale of the company’s LCD fab in China, the pressure has lessened, and the assumption has been that LGD would commit to the new fab early this year.
It seems that this will not be the case if a story out of South Korea is correct, as it indicates that LG Display is actually preparing to do just the opposite.  Instead of adding Gen 8.6 OLED capacity, or adding additional Gen 6 OLED for IT capacity, the information suggests that LGD is actually planning to reduce its existing OLED for IT capacity and convert it to additional Gen 6 OLED capacity to produce iPhones.  The motivation for the change would seem to be Apple, who has seen relatively weak demand for the OLED iPad, which has led to lower utilization rates for LGD at its OLED for IT fab.  In response the story says that LGD wants to convert some of its Gen 6 OLED for IT capacity to iPhone capacity, as it expects to increase3 its iPhone production for Apple this year by almost 17%. 
Such a change would not be cheap as the new iPhone OLED line is expected to cost ~$1.36b US, after LGD spent almost $2.6b US to build the Gen 6 OLED for IT line.  It would also indicate that LG Display does not believe that the demand for OLED IT products will grow as quickly as some predict (OLED penetration into the IT market is expected to reach 2.8% this year and 5.2% next year), essentially betting on iPhone growth and its own ability to capture additional iPhone production share from SDC.  Given LGD’s relationship with Apple, and the fact that Apple has likely financed a portion of LGD’s Gen 6 OLED for IT fab construction cost with pre-payments, Apple would have to sign off on the plan, a tacit agreement as to the potential for a weaker demand picture for OLED for IT going forward.
All in, this is a major decision for LG Display if the story is true, and one that LG Display has been unable or unwilling to make while others have committed.  If LGD decides to reduce OLED for IT and that market takes off it will fall far behind its rivals.  If it reduces OLED for IT capacity and OLED IT demand is less than predicted it will have bypassed months or years of low utilization at a very expensive fab.  No pressure…

The rivalry between South Korean panel producers (Samsung Display (pvt) and LG Display (LPL)) and Chinese panel producers has been ongoing for a number of years as Chinese producers have pushed South Korean producers out of the large panel LCD business.  As it became obvious that Chinese producers had the advantage of significant government construction and operating subsidies, South Korean producers began shifting from LCD display production to OLED production, a relatively new technology at the time.  While Chinese large panel producers eventually won the battle for LCD display domination, South Korean producers went on to establish OLED as a higher quality technology, particularly for small panel displays.  Not to be outdone, Chinese panel producers have been building OLED capacity to challenge South Korean dominance in the OLED space, and while there are a multitude of CE brands that use OLED displays, the top of that list is Apple (AAPL).
Apple’s transition from LCD to OLED starting with the iPhone X, released om November 3, 2017, is expected to continue for the next few years as they migrate much of their product line to OLED.  Samsung Display and LG Display have been the primary small panel OLED suppliers to Apple but are continuingly being challenged by China’s largest panel producer BOE (200725.CH), who has made some inroad with Apple, supplying replacement displays for earlier iPhones and as a 3rd supplier for some later models.  While BOE has had its own issues with Apple, they continue to challenge SDC and LGD, along with a number of smaller Chinese OLED producers, and SDC has gone to the US ITC alleging patent infringement, with BOE, and other Chinese OLED producers (Chinastar (pvt), Tianma (000050.CH), and Visionox (002387.CH)) responding by challenging the validity of those patents in US Patent Court.
As the ITC investigation continues (target date 3/17/25) the patent challenges also continue, and the US Patent Review Board has ruled on one of the 4 patents that Samsung claims were infringed upon.  The ‘683’ patent, filed by Samsung Display on 11/13/17 in the US and 3/6/12 in Korea makes 15 claims concerning OLED pixel structure, particularly Samsung’s ‘diamond’ pixel structure shown on the left side of  Figure 1.  The PTAB has decided that 10 of the 15 claims made in the original patent are not valid, while leaving 5 intact.  Samsung will have the opportunity to appeal that decision. 
Limiting the broad scope of a patent is not an unusual outcome in patent review cases, but narrowing the patent will also narrow the ITC’s investigation scope, making SDC’s case a bit harder, and could open one of the other patents included in the investigation to further scrutiny as it is essentially a continuation of the ‘683’ patent mentioned above.
All in, the validity of the ‘shape’ characteristics of the pixels (polygon, Octagon, or non-quadrilateral) as specified in the ‘683’ patent, remain in effect, which is a key point in terms of the infringement, but spacing between pixels, size, and arrangement, the other ‘683’ claims, are invalidated, reducing the points that SDC can cite in the ITC investigation.  We expect SDC will appeal the PTAB decision, but this ruling and any potential appeal will likely push out the final ITC decision and the battle for OLED supremacy will continue in both the consumer space and the courts for another year.  That’s how lawyers put their kids through college.

[Note: The US Patent Office considers a patent unpatentable when the difference between claimed subject matter and prior art would have been obvious at the time of invention by a person having ordinary skill in the art to which subject matter pertains, where ‘ordinary skill’ means a degree in electrical engineering, material science, physics, or similar disciplines, along with 2 years of professional experience working with display design, including OLED displays or an equivalent level of skill, knowledge, or experience.]

One of the more disconcerting aspects of VR is the fact that you, as an outsider, in the same room with a VR headset wearer, cannot see the wearers eyes, which means you have not visual clues as to where they might be looking, and to a lesser degree, what their full facial expression might be.  While some VR headsets have externally mounted cameras that allow the VR headset wearer to see his or her surroundings, others nearby have no idea where the user’s next move might be or whether they have any idea that someone is in the room with them.  Apple (AAPL) has discovered this quirkiness and has added a feature set to the soon-to-be-released Vision Pro headset that they feel would solve the problem, although we expect not everybody might agree.
According to developer literature for the Vision Pro, when the user first purchases the headset, they go through a procedure similar to a developing an avatar where the user holds the headset in front of their face and takes a series of facial ‘shots’ including a number of expressions.  The system then creates an avatar based on the ‘shots’ and when the user puts the headset on, the avatar is projected on the front faceplate.  This looks, to someone on the outside, as if the users eyes are visible, although it is actually the eyes of the avatar, which, while it has relatively limited resolution, Apple uses some effects to hide the quality of the image.
“EyeSight” as Apple calls it, seems to be unique to the Vision Pro, and will likely be used for other even more unusual effects by developers after the device is in actual circulation.  The question is, is it more disconcerting not to know where the users’ eyes are looking or to see the visual image shown below.  We make the assumption that the system is able to track eye movements with enough speed not to make the avatar’s movements jerky or unnatural, but there is still something a bit creepy about the feature.  We are not sure if the Apple solution is the ultimate one, and we do give Apple credit for identifying the issue and proposing a logical solution, but it still seems a bit disturbing.
Here's the link to the short (50 sec.) avatar set-up video.
https://twitter.com/i/status/1724539857752519028
​

​When consumers say a CE product is ‘hot’, that is usually a good sign, however, despite the positive expectations and strong pre-orders, the new iPhone 15 series is hot, but not necessarily in a good way.  It seems that some consumers have found that their new iPhone’s have been getting hot, hot enough that they automatically shut down until they can cool down.  While this does not seem to be a widespread problem, it does seem to happen across the entire iPhone 15 line, which tends to end the speculation that it is related to the Titanium shell that is used on the iPhone 15 Pro and Pro Max.  While the internet was abuzz with speculation about why this might be happening, such an issue can quickly become a marketing nightmare, as it did for Samsung (005930.KS), when it was forced to recall 2.5m Note 7 smartphones in September of 2016 when they were found to not only overheat, but also catch fire due to battery issues.
Apple (AAPL) has responded to the on-line furor over the weekend, making the following statement:
“We have identified a few conditions which can cause iPhone to run warmer than expected.  The device may feel warmer during the first few days after setting up or restoring the device because of increased background activity.  We have also found a bug in iOS17 that is impacting some users and will be addressed in a software update.  Another issue involves some recent updates to 3rd party apps that are causing then to overload the systems.  We are working with these app developers on fixes that are in the process of rolling out.”
What is Apple actually saying?   Your phone will be hot for a few days after you start using it because things are running in the background that will stop after a few days.  What things and what are they doing, and what will they be finished with in a few days?  What ever these ‘few conditions’ are or why they are running the phone hotter than normal, Apple did not say.    Is the bug in iOS 7 part of the overheating problem, and when will it be addressed in a software update?  What are the ‘3rd party apps doing that would overload the system?  Are they demanding too much processor time or bandwidth?  When will this be fixed, whatever it is?
We give Apple credit for at least addressing the issue quickly, however the bigger question is whether Apple will disclose the actual issues and whether the software fix will affect the abilities of the iPhone if it is the only alternative.in the near-term.  Apple lost a $500m class action lawsuit in 2020 for throttling the performance of some iPhones in order to fix processor and battery problems without informing consumers and faced similar suits in Europe.  It will be essential that Apple is honest with consumers, about the issue and the fix, given past history.  If they need to throttle performance to avoid the issue until a more permanent fix can be found, that’s fine (coming from an Android user), but more specific details are necessary to keep the general public from becoming wary of problems with the iPhone 15 series, and you know competitors will use that to their advantage whenever possible.  Waiting for the “Forged in Fire and still on fire!” YouTube videos…

As we have noted, Apple is picky about companies in their supply chain and those that want to join.  Whenever possible they try to maintain 3 to 4 suppliers for each component, in order to make sure supply will not be interrupted in the event of a catastrophe with one supplier.  Such a situation occurre4d in late 2021 when Sharp’s (6753.JP) camera module factory in Ho Chi Minh City was closed due to COVID quarantines.  At the time, Sharp’s component inventory for the iPhone 13, which was being assembled for its 9/24 release, were moved to LG Innotek’s (011070.KS) in Hai Phong, which remained open.  Since then LG Innotek has maintained a ~70% share of Apple’s iPhone camera module supply, with Sharp the #2 supplier, with Foxconn (2354.TT) and Cowell Optics (1415.HK) the smaller suppliers.  In 2021 Apple removed China’s O-Film (002456.CH) from its supplier list after it was accused of using forced Uygur labor and put on the US entities list in July of that year (since removed).
Apple spends roughly two years working with suppliers to prepare for a new iPhone release and Sharp did not participate in the iPhone 2016 program, so it is assumed that they will not be involved in the iPhone 16 release in 2024, with LG Innotek likely to pick up much of the slack as they have expertise in ToF, which is being added to the iPad and folded zoom modules, which will be added to the iPhone 15 Pro Max this year.  A folded zoom lens uses prisms to bend light before it enters the lenses, allowing them to be placed horizontally, rather than stacked from front to back.  This allows the camera module to be thinner, but it also requires an image stabilizing actuator, which will also be supplied by LG Innotek and Jahwa Electronics (033240.KS), also a supplier to Samsung.

The word this week is that Apple (AAPL) is going into the display business.  Headlines that Apple will be producing its own displays in order to reduce its dependance on current display suppliers, particularly Samsung Display (pvt), who is the company’s primary high-end display supplier for the iPhone.  The stories are based on Apple’s Micro-LED R&D, which is supposed to lead them to producing Micro-LED displays for the Apple Watch series in 2025 and leading to the adoption of the technology for the iPhone line in subsequent years.  The sources, based in Japan, are touting Apple’s R&D efforts in Japan and at their ‘secret’ facility in Taiwan, that has been working on Micro-LED development for a number of years., and where “…they have designed not only the driver ICs for the Micro-LED screens, but also some of the production equipment itself to better control the transfer process…”
We agree that Apple has been researching Micro-LEDs for a number of years, working with AU Optronics (2409.TT), Ennostar (3714.TT), and a number of other suppliers to develop a cost-effective way to use the technology, as it did with OLED technology, and it does with almost all other potential display technologies.  Spending ~8.3% of sales on R&D such programs at Apple are and have been extremely comprehensive, with considerable time spent evaluating the current state of display technologies, and doing original research to see if some of the stumbling blocks to mass production can be removed.  This certainly carries over into silicon, where Apple designs its own processors and a number of other more specialized chips as shown in Figure 1.
Apple, whether you are a fan or not, is known for setting high quality standards for its components, particularly displays, and those high standards have led to Samsung Display’s dominance as an Apple display supplier, given their many years of experience   in RGB OLED technology.  Apple has been especially slow to bring in new display technologies, waiting until early products have shown flaws and technical miscalculations, to avoid tarnishing the Apple image.  During the ‘learning’ period, Apple has consistently worked with such new technologies and partnered with display producers, both to develop specifications and to improve the manufacturing process.  In that regard, Apple engineers have developed tools and equipment for pilot lines and specifically approve key tools used by suppliers before approving production.
But we note that Apple is a design and marketing company, and contracts production and assembly to others.  In some cases they contribute to that production by funding the construction of dedicated facilities as an advance against future production, but rarely, if ever, is Apple a mass producer of its own components, and the silicon mentioned above is designed by Apple but produced by others, such as Taiwan Semiconductor (TSM), Samsung Electronics (005930.KS), Intel (INTC), IBM (IBM), and Global Foundries (GFS).  While we would expect that Apple will eventually move its Micro-LED R&D from the lab to use in a product, we expect Apple will source the Micro-LED display to an outside supplier, likely someone who has contributed to R&D.  As Micro-LED displays are produced using technology that is different from LCD or OLED technology and more similar to the production of LEDs, which are grown on sapphire or GaN (Gallium Nitride) and then transferred to a glass substrate, Apple’s choice of suppliers will depend entirely on both the experience of the Micro-LED producer and their ability to produce such displays in large quantities.
Given that the technology for Micro-LEDs is still being developed and mass production techniques are changing almost daily, it would be hard to know who Apple might choose to produce their first commercial Micro-LED displays, and more important, who would be able to sustain that production.  With the playing field that wide open, it is up to current display producers as to how much they would invest in the technology to reap the benefits of being a major supplier to Apple, along with LED producers who might develop the technology as an adjunct to their current LED production businesses.  If Apple were to decide it needed absolute control over Micro-LED display production, it would have to make additional investments in building a mass production facility, likely costing billions, and would be taking on the risk of managing more leverage to the macro environment.  They would lose the ability to pit one supplier against another, which they have now, that allows them pricing leverage, and they would have to carry much larger PPE on their balance sheet, so in the long run, that loss of absolute control over pricing, process, etc. would be counterintuitive to Apple’s mandate.
More to the point would be the timeline that Apple might use to develop and commercialize what it has learned about Micro-LED display production, and that will likely happen more slowly than expected, as Apple is less of a technology pioneer than a reputation marketer.  A blot on that reputation from a product glitch or a move that could alienate a loyal customer base would upset the apple cart (sorry) far more than having to maintain an over-the-shoulder position with your key suppliers, or deal with a supplier that pushes back a bit because of their dominant technological or manufacturing position.  Apple is among the most customer-centric companies in the CE space and its reputation is far more valuable than its technology in our view.  Apple’s supply chain is among the best in the space and its control over its suppliers is legendary.  Why change it to gain a bit more control?

At the end of last month we noted (4/27/23) that while there was still time for Samsung Display to decide to make its investment in a Gen 8 OLED fab a reality, time was beginning to run out.  It seems that, according to Korean sources, has created an internal organization to begin to execute plans for said Gen 8.6 OLED fab, and has begun to order equipment for same.  The new fab would be oriented toward the production of IT OLED products, with a potentially large consumer company () a likely customer over the next few years, along with parent Samsung Electronics.  When this fab is completed, it will be the first of its kind, producing RGB OLED displays on a substrate that is over double the surface area of the current Gen 6 fabs that are producing RGB OLED displays for smartphones and IT products, giving Samsung Display a volume and efficiency advantage over its competitors.
The project is expected to cost ~$3.1b US, and purchase orders are said to be released this month, starting the construction process, which has been in development for many months.  The heart of the fab will be the deposition tools, which pattern OLED materials on the substrate through fine metal masks.  These tools are typically designed for Gen 6 substrates, so tools for this larger base will have to be custom built, and as we have noted before, there has been some question as to who will be contracted to build such tools.  LG Display has aligned itself with Sunic Systems (171090.KS), but Samsung Display has yet to place an order with Sunic or the market leader Canon-Tokki (7751.JP), who developed a system that can automate a number of deposition functions, including cathode metal and organic material deposition, and encapsulation.  Samsung was said to be trying to negotiate a price that does not include development costs, which Canon wants to include.  Smaller Gen 6 systems start at ~$100m, likely putting the cost of a Gen 8 mass production system between $200m and $250m.

average guy or gal in the street might not know much about this 5-day event, or even care.  In most instances there is little reason for the average Apple user to pay much attention to what is discussed at the conference, as they will likely not see the actual changes to their devices until much later in the year if they notice them at all.  But this year could be different in that not only will Apple present developers with a new version of iOS (iOS 17), and new versions of iPad OS, MacOS, Watch OS, and TV OS, as they typically do, but the company is expected to announce the long-awaited XR headset that has been rumored for years.
Apple’s XR development program has been around in its current form since 2017, but Apple has been making acquisitions relating to AR/VR since 2014 (see below) and allows developers access to a number of tools and resources that they can use to create AR and VR applications for iOS and iPad OS and have access to the Apple Store.  But Apple itself has not championed a physical XR headset, disappointing developers and fans a number of times in the past.  The most recent ‘rumored’ device, the Apple Reality Pro, would be Apple’s entry into the XR hardware space, and would be a driver for the industry, that in the long run, would likely have even more impact than Meta’s (FB) Quest series of VR headsets, as Apple’s
hardware following, with over 2 billion active devices, to Meta’s ~20m Quest headsets sold.  Of course, Meta has over 2b active Facebook users, along with Instagram, Messenger, etc., but hardware is Apple’s thing.
If Apple does decide to make an announcement concerning an XR device, it will be to stimulate developers to build or modify apps to operate under what will likely be a new sub-OS specifically designed for Apple’s XR hardware, seemingly called xrOS.  This code will work under iOS and will allow the device to communicate and process applications that reside on a secondary device, such as an iPhone or iPad.  Making the headset a ‘non-standalone’ device, reduces the bulk, weight, and computing power on the headset itself, making it more comfortable to wear, a concept not lost to Apple developers who are likely following many Apple design mantras that are consumer oriented over technology oriented, while tethering also means at least one other Apple device must be purchased or owned for the headset to be operated.
Expectations are that the headset battery, which in some headsets is in the headset itself, will likely be external, perhaps a belt or pocket clip-on, with a cable to the headset, while the communication between the headset and the paired device could be a cable or wireless, but the Apple XR device is also expected to not sport controllers, which would be a departure from the norm.  It has been suggested that Apple will use gestures to control the headset, with a large number of cameras scanning body movements, eye movements, area mapping, and even facial expressions for information that the xrOS can use to keep the user’s field of view correct.
The displays are expected to be something close to 4K micro-OLED displays, with on-board processing through Apple’s own SoC, either the M2 or a specially designed processor, with a focus on power efficiency given the battery-driven nature of the device, but while developers will be interested in the internals, consumers will be more concerned with how it looks, how it feels, and can it do things other AR/VR headsets cannot, and the idea that the device can operate as both a VR and AR device is not new.  Other VR headsets allow a black mask to be removed from the headset, allowing it to operate as an AR device through cameras, so the proof will be in the applications themselves and how easily the headset operates. 
​As we have noted recently eye-tracking is becoming  more popular as it facilitates foveated rendering, and movement tracking are common, so it will be incumbent on Apple to devise a gesture system that is intuitive for consumers, but on an overall basis, for Apple to have a successful product, especially on that is expected to cost between $2,500 and $3,000, it must be able to provide functionality, as while there will be an initial rush from ‘I always buy the newest Apple product’ people, it better provide more than ‘coolness’, and much of that will come from applications.  While the iPhone is a well-designed device, as are most Apple products, it also serves as a communication hub for its users, and while we do not expect an Apple XR headset to become as ubiquitous as an iPhone in the near future, it has to be able to do more than play games or allow you to buy things in the Metaverse.  We keep our expectations low but our hopes high.

​It has not been lost to the press that Apple (AAPL) has been working toward moving more of its product line toward OLED displays, and all sorts of timelines for the iPad, Macbooks, and potentially other products’ OLED adoption have been bandied about.  Given that there are only a few potential OLED suppliers who are both qualified by Apple and can deliver the volumes necessary, much of the discussion around Apple’s transition has been concerning Samsung Display (pvt), LG Display, and China’s BOE (200725.CH).  With current production of OLED IT panels limited to Gen 6 OLED fabs, all three OLED producers (and some others) have indicated or hinted that they would be making investments in new capacity to support Apple’s transition, of course, without naming Apple itself as a customer.
In order to improve efficiency and volume, there has been considerable speculation that such new facilities would be Gen 8 RGB OLED fabs, which currently do not exist (LG Display has Gen 8 OLED fabs but they use a non-RGB process that is not viable for Apple’s specifications), so considerable R&D has been, and still has to be done to design the equipment necessary to make the transition to Gen 8 OLED production for Apple’s (and others’) IT products. 
Up until the beginning of this year, most predictions included Samsung Display starting construction on a Gen 8 RGB OLED fab this year, either converting an idle Gen 8 LCD fab or converting a Gen 6 line to Gen 8.  LG Display, while a bit less specific, has been expected to do the same, and BOE, has hinted that they will follow a similar path ‘as the market demands’, but the ever-shifting sands of the CE space have begun to cast askance at those plans and concomitant timelines.  The equipment needed to deposit OLED materials on the larger Gen 8 substrates takes considerable R&D to develop, and as we have noted previously, there are only a few companies with the expertise to develop such tools.  Sunic Systems (171090.KS) is working with LG Display, and at one time Samsung Display was working with ULVAC (6728.JP) on such tool development, but has since abandon that project, and is looking at the industry leader Canon-Tokki (7751.JP) as a potential Gen 8 deposition tool supplier.  However, Canon does not want to bear the cost of the tool’s development, as Gen 8 OLED adoption is still an unknown, and expects Samsung Display to pay for the development as a part of the tool price.
With the objective of reducing costs/m2, a boost to tool costs will eat away at the process BOM, and SDC has been hesitating to place the order with Canon, with a cut-off of the end of 2Q if it is to meet the goal of Gen 8 production for Apple in 2024.  But it seems not only has the cost of building out Gen 8 OLED capacity been an issue, but the trade press has taken Apple’s recent Mac sales declines as an omen that is adding additional hesitation to the Gen 8 OLED build-out for all potential participants.  We differ.
As with almost all CE products, the COVID-19 pandemic changed what was previously a relatively stable demand picture for Apple products.  Mobile devices saw some early positive momentum, but the need to communicate online became the driver for tablet, laptop, and PC sales that set volume records.  We look at the years between 2020 and 2022 as ‘aberrational’ in terms of demand and look to more normalized unit volumes as a better indicator of what we should expect going forward.  In the case of Apple, particularly the Apple Mac, a tool that is known for its use among content developers who require high quality displays, the logic holds that Apple would like to make the transition to OLED for its color purity, high contrast, and color gamut, but recent headlines from overseas are decrying the fact that Apple’s Mac sales are declining and adding to OLED panel producers’ hesitation concerning spending for Gen 8 RGB OLED fabs. 
However looking at Apple’s Mac sales going back to 2018, they average $6.35b per quarter, including the heady COVID years, which puts the last two quarters above the LTY average, despite the decline from 2022.  More specifically, Apple’s 2Q Mac sales of $7.168b, which seemed to trigger the recent press concerns, are only 1.14% lower than the average of all 2Q results since 2018, including those in the COVID years, and just looking at the pre-COVID years (2018 – 2020), 2023 2Q Mac sales are 28.7% higher than the average.
We expect SDC and LGD are most concerned about the cost of making the conversions to Gen 8 against other larger substrate transitions, rather than Apple’s near-term results, and if either company has been assuming that demand during COVID was ‘real’, we have misjudged both companies.  Spending the billions necessary to build out a Gen 8 OLED infrastructure for IT was a risky business before COVID, during COVID, and will be after COVID, but those decisions tend not to be made on near-term issues, as they are bets that will play out over many years.  SDC does have the cost issue to settle with Canon, especially as LGD has aligned with Sunic Systems, but we expect that has more to do with the timing of Samsung Display’s decision than the relative decline in Apple’s Mac sales over the last two quarters.

According to sources in South Korea, which does tilt the story a bit, China’s largest panel producer, BOE (200725.CH) will only be supplying OLED displays for one model of the iPhone 15 to be released later this year.  While both Samsung Display (pvt) and LG Display (LPL) will be producing LTPO displays for the iPhone 15 Pro Max and iPhone 15 Pro, BOE is expected to be supplying displays only for the iPhone 15 model, rather than both the iPhone 15 and the iPhone 15+.  Samsung will be taking up the slack with the iPhone 15+.
BOE has had an up and down relationship with Apple (AAPL) concerning OLED displays, with a number of failed attempts to get on Apple’s OLED display provider list, which has been the exclusive territory of Samsung Display and LG Display.  BOE did supply Apple with replacement OLED displays, sort of a test run for inclusion and was able to convince Apple that it had the technical and volume capabilities to supply LTPS OLED displays for the iPhone 13, released in September 2021, and the iPhone 14, released in September of last year, a point that has been emphasized by the Chinese press innumerable times.  That said, BOE made a catastrophic mistake by changing the design of a TFT backplane in order to improve yield, without getting the change approved by Apple.  We assume that the change was made in order to bring yields to levels necessary to satisfy Apple’s demand requirements.  This caused BOE to be put in the penalty box for the iPhone 14, limited to only producing OLED displays for the iPhone 14 6.1” model and that seems to still be the case with the iPhone 15.
It had not been expected that BOE would be supplying OLED displays for the high-end iPhone 15 models (Pro Max & Pro), as they require LTPO backplanes, a process for which Samsung Display has the most expertise and capacity, along with LG Display, who also has LTPO capacity, but it was expected that BOE would expand its OLED display supply to both LTPS models (iPhone 15 and iPhone 15+), which, at least at this time, does not seem to be the case.   
While there is still time for things to change, as production for this year’s iPhone release does not usually start until July/August, there is also the fact that Samsung has warned BOE that it has been infringing on certain of its OLED patents, and while Apple would therefore be involved in an infringement case, if SDC were to bring the dispute to the courts, there is the possibility that Apple has limited BOE’s participation in the iPhone 15 for both reasons..  While we expect the Chinese press will spin the less than expected participation in the iPhone 15 in a more positive light, and BOE could stack the deck a bit by lowering its quote on the iPhone 15+ displays, but Apple has always been a stickler for suppliers meeting their stringent specifications, both technical and volume related, so it might be a bit more difficult for BOE to change the situation that with other customers, but we note that BOE is about as determined to challenge SDC’s and LGD’s OLED leadership as anyone could be and seems to have a massive amount of energy and will toward making its relationship with Apple continue to grow.  Essentially, they don’t seem to take no for an answer and rejection only seems to spark the company to work harder toward achieving that goal.

​Key = Light Blue – LTPO -  Gray – LTPS