More OLED for Apple?
Samsung Display is Apple’s (AAPL) primary flexible OLED supplier for the iPhone, with LG Display having rebuilt it relationship with the company after problems with OLED displays in 2019 forced LG Display to prove to Apple it had resolved OLED display production issues through an extended requalification process. More recently China’s BOE, has also gone through such an extended qualification process with Apple that after a number of failures has now allowed them to become a 3rd OLED supplier for the iPhone line. While the qualification process that Apple requires is based on both the quality of the display and the ability to meet production goals (yield), the reward, given the iPhone’s popularity and its premium price, is considerable and a goal for almost all OLED panel suppliers and while Apple tends to keep the number of display suppliers for the iPhone to a minimum, we expect almost all OLED suppliers have or will try to gain that access.
Apple certainly has an incentive to go through the qualification process with potential iPhone OLED panel suppliers as the company is always looking for ways to bargain down panel prices with Samsung and LGD, so the inclusion, or even the possibility of inclusion of another supplier gives them increased leverage. The offset is that SDC has been producing flexible OLED panels longer and in higher volumes than other producers, which gives them an advantage as to both technical capability and production stability, both key factors in Apple’s iPhone display producer choices, and SDC’s ability to produce LTPO (Low-temperature Polyoxide) backplanes, a necessity for Apple’s variable refresh rate feature, still keeps them ahead of the pack.
That said, there are contenders, with China’s Visionox (002387.CH) sampling to Apple last year and more recently Chinastar (pvt), a subsidiary of TCL (000100.CH) forming a group to work toward conforming its small panel OLED production to Apple’s standards. China star operates a Gen 6 OLED fab in Wuhan with a capacity of 30,000 sheets/month and plans to add an additional 15,000 sheet line to the fab, so in its present state Chianstar would be in the early stages of a qualification process, which could eventually lead to the development of a pilot line specifically designed to meet Apple’s specifications. Whether this means an LTPS line, which would put them in contention with BOE, or an LTPO line, which would challenge SDC and LGD remains to be seen, although Chinastar does have considerable expertise in developing oxide backplanes for LCD, but we expect any real volume production for Apple would be 2 to 3 years out, if they are able to get through qualification.
With a folding iPhone somewhere in Apple’s future, a new display category could help smaller OLED producers like Visionox, Tianma (000050.CH), or Chinastar step forward with Apple, but again Samsung Display has considerable expert and experience in the foldable space already so new entrants would have to find a feature that would attract Apple’s attention as more than a point of leverage, which is not an easy task given SDC’s size and resources. The capacity issue is also a factor as much of small panel OLED production for Apple is done on dedicated production lines, some of which have been partially financed by Apple itself, but building such high volume lines is capital intensive, time-consuming (18+ months) and has no guarantee that yields will be high enough to produce profits, and also carry the risk that Apple will decide to reduce its OLED exposure at some point down the road, so these are no decisions taken lightly. That said, with the vision of selling millions of OLED displays to Apple in their heads, it is easy to see why almost all OLED panel producers will vie for that brass ring, even if it burdens financial goals for years. It will take some very understanding capital sources for most smaller producers to enter such a competition in a realistic way, so we are a bit less excited about the prospects for new OLED panel producers being added to Apple’s iPhone supply chain, but it is certainly in Apple’s best interests to encourage same.
Apple certainly has an incentive to go through the qualification process with potential iPhone OLED panel suppliers as the company is always looking for ways to bargain down panel prices with Samsung and LGD, so the inclusion, or even the possibility of inclusion of another supplier gives them increased leverage. The offset is that SDC has been producing flexible OLED panels longer and in higher volumes than other producers, which gives them an advantage as to both technical capability and production stability, both key factors in Apple’s iPhone display producer choices, and SDC’s ability to produce LTPO (Low-temperature Polyoxide) backplanes, a necessity for Apple’s variable refresh rate feature, still keeps them ahead of the pack.
That said, there are contenders, with China’s Visionox (002387.CH) sampling to Apple last year and more recently Chinastar (pvt), a subsidiary of TCL (000100.CH) forming a group to work toward conforming its small panel OLED production to Apple’s standards. China star operates a Gen 6 OLED fab in Wuhan with a capacity of 30,000 sheets/month and plans to add an additional 15,000 sheet line to the fab, so in its present state Chianstar would be in the early stages of a qualification process, which could eventually lead to the development of a pilot line specifically designed to meet Apple’s specifications. Whether this means an LTPS line, which would put them in contention with BOE, or an LTPO line, which would challenge SDC and LGD remains to be seen, although Chinastar does have considerable expertise in developing oxide backplanes for LCD, but we expect any real volume production for Apple would be 2 to 3 years out, if they are able to get through qualification.
With a folding iPhone somewhere in Apple’s future, a new display category could help smaller OLED producers like Visionox, Tianma (000050.CH), or Chinastar step forward with Apple, but again Samsung Display has considerable expert and experience in the foldable space already so new entrants would have to find a feature that would attract Apple’s attention as more than a point of leverage, which is not an easy task given SDC’s size and resources. The capacity issue is also a factor as much of small panel OLED production for Apple is done on dedicated production lines, some of which have been partially financed by Apple itself, but building such high volume lines is capital intensive, time-consuming (18+ months) and has no guarantee that yields will be high enough to produce profits, and also carry the risk that Apple will decide to reduce its OLED exposure at some point down the road, so these are no decisions taken lightly. That said, with the vision of selling millions of OLED displays to Apple in their heads, it is easy to see why almost all OLED panel producers will vie for that brass ring, even if it burdens financial goals for years. It will take some very understanding capital sources for most smaller producers to enter such a competition in a realistic way, so we are a bit less excited about the prospects for new OLED panel producers being added to Apple’s iPhone supply chain, but it is certainly in Apple’s best interests to encourage same.
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