iPhone 13 - BOE In/Out and More…
Chinese OLED panel producer BOE (200725.CH) has had a rocky path with Apple (AAPL). While the company supplies OLED panels to a number of Chinese smartphone brands, BOE has been attempting to break into the iPhone supply chain, which has been dominated by Samsung Display (pvt) and LG Display (LPL). Apple’s display criteria, while they might not be the most advanced from a technical standpoint, are quite stringent, with a particular emphasis on yield, given release delays that Apple has faced in the past.
Last year’s late iPhone releases were a result of the effects of COVID-19, at least according to the company, but Apple has faced release delays in other years due to quality issues, even with Samsung, the leader in small panel OLED flexible displays. For a time LG Display was relegated to supplying replacement displays for the iPhone, until they were able to prove to Apple that they fully capable of meeting Apple’s technology and volume requirements.
BOE has been in a similar position, supplying replacement displays for the current iPhone, but has been looking to graduate to becoming a full supplier. Last year BOE was evaluated at least twice, and while they were able to join the Apple iPhone display supply chain as a tertiary supplier, they were not qualified by Apple to be a primary supplier for the current iPhone 12. There have been a number of comments made by both Chinese and Korean press, indicating that BOE had or had not been qualified by Apple as a primary supplier after further review, with the pendulum leaning toward Apple’s acceptance of BOE for the upcoming iPhone 13, however Korean trade press has indicated that such is not the case, at least this far into the year, meaning that BOE will not be a primary iPhone 13 OLED display supplier.
Mass production for the iPhone 13 is expected to begin next month, and while this does not completely rule out BOE, who could get qualified later this year, it certainly compresses their ability to garner any meaningful volume this year. Since Apple does not indicate which display suppliers will be producing each iPhone model, or what the size, mix, and features will be for the iPhone 13, we have to make some assumptions as to how the iPhone 13 series will play out this year.
Expectations are that Apple will not change the size of the displays for the iPhone 13 from those of the iPhone 12, which would indicate a 5.4” iPhone Mini, a 6.1” iPhone 13 and iPhone 13 Pro, and a 6.7” iPhone 13 Pro Max, but there are expectations for other changes. In the iPhone 12 series, touch was embedded in the OLED display for the iPhone 12 Pro and Pro Max, while the Mini and the iPhone 12 used an attached touch system. We expect that all four, or at the least three of four models this year wil have embedded touch, with the Mini being a possible exception to keep BOM as low as possible.
We also expect that the iPhone 13 Pro and Pro Max will adopt a refresh rate of 120 Hz., and with that feature will be a TFT structure based on LTPO (Low temperature Poly-Oxide), and alternative to the more standard LTPS (Low temperature Poly-Silicon). As the higher refresh rate would tax the battery, as the screen is redrawn twice as often, the use of LTPO would offset some of that battery drain, as it is more power efficient. LTPO is a relatively new TFT process and could be one contributing factor in the assumed decision by Apple concerning BOE, although that would only rule out BOE for the two higher-end iPhones. We suspect such a decision by Apple, would have been based on BOE’s ability concerning overall yield, rather than a single feature.
Current expectations are that Samsung Display will supply between 120m and 130m OLED displays for the iPhone 13, with LG Display supplying 50m, a big improvement over last year’s ~20m units, for a total of between 170m and 180m by the end of the year, and based on these expectations we ran an analysis of Samsung and LG’s capacity to gain some insight as to what the production schedule for the iPhone 13 might look like this year. In order to do so, we have to make some basic assumptions concerning capacity allocation, yield, mix, and even whether the iPhone Mini will play a significant role in the iPhone 13 series volumes, given its relatively poor showing so far this year.
We make the assumption t5hat Samsung Display has dedicated the entire output of its A3 OLED fab to production for the iPhone, but based on our yield assumptions, our model would indicate that Samsung would fall short of its expected goal. That said, we know that Samsung has been working toward refitting a portion of its A4 OLED fab to produce LTPO displays, which when included, would allow Samsung to meet those production expectations. LG Display, based on capacity at its E5 and E6 fabs should be able to meet current target expectations.
Again, much will depend on yields, even for these two more experienced suppliers, and mix, which, while Apple will set based on its sales expectations, could change based on consumer reaction to model prices. We do build in a relatively small change in mix in 4Q, with less Mini and more Pro and Pro Max, but that is a variable that could change earlier based on initial sales. If Apple actually maintains current volume expectations for iPhone 13, it will represent a very substantial part of LG Display’s overall flexible OLED capacity for the year, and while less so for Samsung, we expect it will keep Samsung’s overall small panel utilization rate at a high level for much of the year. Given a lower yield at the onset of production, the impact to profitability for both would be lower in 2Q, rising in the 2nd half, and we expect that the unit price of the displays, when compared to the combined cost of touch and display, will be a bit lower or the same for Apple, while the overall profitability for both suppliers will be higher, having captured 100% of the touch revenue.
Last year’s late iPhone releases were a result of the effects of COVID-19, at least according to the company, but Apple has faced release delays in other years due to quality issues, even with Samsung, the leader in small panel OLED flexible displays. For a time LG Display was relegated to supplying replacement displays for the iPhone, until they were able to prove to Apple that they fully capable of meeting Apple’s technology and volume requirements.
BOE has been in a similar position, supplying replacement displays for the current iPhone, but has been looking to graduate to becoming a full supplier. Last year BOE was evaluated at least twice, and while they were able to join the Apple iPhone display supply chain as a tertiary supplier, they were not qualified by Apple to be a primary supplier for the current iPhone 12. There have been a number of comments made by both Chinese and Korean press, indicating that BOE had or had not been qualified by Apple as a primary supplier after further review, with the pendulum leaning toward Apple’s acceptance of BOE for the upcoming iPhone 13, however Korean trade press has indicated that such is not the case, at least this far into the year, meaning that BOE will not be a primary iPhone 13 OLED display supplier.
Mass production for the iPhone 13 is expected to begin next month, and while this does not completely rule out BOE, who could get qualified later this year, it certainly compresses their ability to garner any meaningful volume this year. Since Apple does not indicate which display suppliers will be producing each iPhone model, or what the size, mix, and features will be for the iPhone 13, we have to make some assumptions as to how the iPhone 13 series will play out this year.
Expectations are that Apple will not change the size of the displays for the iPhone 13 from those of the iPhone 12, which would indicate a 5.4” iPhone Mini, a 6.1” iPhone 13 and iPhone 13 Pro, and a 6.7” iPhone 13 Pro Max, but there are expectations for other changes. In the iPhone 12 series, touch was embedded in the OLED display for the iPhone 12 Pro and Pro Max, while the Mini and the iPhone 12 used an attached touch system. We expect that all four, or at the least three of four models this year wil have embedded touch, with the Mini being a possible exception to keep BOM as low as possible.
We also expect that the iPhone 13 Pro and Pro Max will adopt a refresh rate of 120 Hz., and with that feature will be a TFT structure based on LTPO (Low temperature Poly-Oxide), and alternative to the more standard LTPS (Low temperature Poly-Silicon). As the higher refresh rate would tax the battery, as the screen is redrawn twice as often, the use of LTPO would offset some of that battery drain, as it is more power efficient. LTPO is a relatively new TFT process and could be one contributing factor in the assumed decision by Apple concerning BOE, although that would only rule out BOE for the two higher-end iPhones. We suspect such a decision by Apple, would have been based on BOE’s ability concerning overall yield, rather than a single feature.
Current expectations are that Samsung Display will supply between 120m and 130m OLED displays for the iPhone 13, with LG Display supplying 50m, a big improvement over last year’s ~20m units, for a total of between 170m and 180m by the end of the year, and based on these expectations we ran an analysis of Samsung and LG’s capacity to gain some insight as to what the production schedule for the iPhone 13 might look like this year. In order to do so, we have to make some basic assumptions concerning capacity allocation, yield, mix, and even whether the iPhone Mini will play a significant role in the iPhone 13 series volumes, given its relatively poor showing so far this year.
We make the assumption t5hat Samsung Display has dedicated the entire output of its A3 OLED fab to production for the iPhone, but based on our yield assumptions, our model would indicate that Samsung would fall short of its expected goal. That said, we know that Samsung has been working toward refitting a portion of its A4 OLED fab to produce LTPO displays, which when included, would allow Samsung to meet those production expectations. LG Display, based on capacity at its E5 and E6 fabs should be able to meet current target expectations.
Again, much will depend on yields, even for these two more experienced suppliers, and mix, which, while Apple will set based on its sales expectations, could change based on consumer reaction to model prices. We do build in a relatively small change in mix in 4Q, with less Mini and more Pro and Pro Max, but that is a variable that could change earlier based on initial sales. If Apple actually maintains current volume expectations for iPhone 13, it will represent a very substantial part of LG Display’s overall flexible OLED capacity for the year, and while less so for Samsung, we expect it will keep Samsung’s overall small panel utilization rate at a high level for much of the year. Given a lower yield at the onset of production, the impact to profitability for both would be lower in 2Q, rising in the 2nd half, and we expect that the unit price of the displays, when compared to the combined cost of touch and display, will be a bit lower or the same for Apple, while the overall profitability for both suppliers will be higher, having captured 100% of the touch revenue.
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