When Apple Says “Do it”, You Do it
Jahwa Electronics (033240.KS) is expected to be the producer of optical image stabilizers for the iPhone 14 due out in 2022, the first time the company has become part of the Apple supply chain. Optical image stabilizers are used to keep small device movements by the user from disrupting the image as it moves through the lens system to the image sensor and blurring the picture. This is done by making small counter-movements to the lens or the camera module itself as the picture is being taken. The company has expanded its OIS operation through the purchase of an idle factory in Gumi, South Korea, the location where LG Innotek (011070.KS), the primary supplier of camera modules for the iPhone has a number of factories. Apple management visited the Jahwa factory in Cheogju in June of this year, leading to the qualification. We expect the new Jahwa plant will be dedicated to Apple exclusively, who was instrumental in choosing the location of the new plant.
As the sophistication and cost of camera modules used in the iPhone have increased over the last few years, Apple has begun to change the way it procures camera modules. In previous years the company purchased double and triple camera modules from LG Innotek, Sharp (6753.JP), and O-Film (002456.CH), with O-Film having been eliminated from the Apple supply chain for ethical violations this year. Going forward, it is expected that Apple will procure camera module components individually, with LG Innotek and Sharp now supplying the cameras themselves to Foxconn (2354.TT), who will now do the module assembly for Apple.
While we believe the motivation for the change is cost based, higher resolution image sensors in new cameras make the necessity for OIS considerably greater, requiring Apple to have more control over both the components and the assembly process, which includes an alignment step that is critical for the modules to function properly. Hyvision (126700.KS), a producer of camera module inspection equipment is supplying such equipment to Foxconn and to LG Innotek for both optical camera and TOF production. As Apple is expected to increase 2022 iPhone unit volume by up to 30%, Jawah’s commitment to the new plant is testament to Apple’s supply chain strength.
As the sophistication and cost of camera modules used in the iPhone have increased over the last few years, Apple has begun to change the way it procures camera modules. In previous years the company purchased double and triple camera modules from LG Innotek, Sharp (6753.JP), and O-Film (002456.CH), with O-Film having been eliminated from the Apple supply chain for ethical violations this year. Going forward, it is expected that Apple will procure camera module components individually, with LG Innotek and Sharp now supplying the cameras themselves to Foxconn (2354.TT), who will now do the module assembly for Apple.
While we believe the motivation for the change is cost based, higher resolution image sensors in new cameras make the necessity for OIS considerably greater, requiring Apple to have more control over both the components and the assembly process, which includes an alignment step that is critical for the modules to function properly. Hyvision (126700.KS), a producer of camera module inspection equipment is supplying such equipment to Foxconn and to LG Innotek for both optical camera and TOF production. As Apple is expected to increase 2022 iPhone unit volume by up to 30%, Jawah’s commitment to the new plant is testament to Apple’s supply chain strength.
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