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TAIPEI / BEIJING / SEOUL – Next year, Apple will finalize the certification of the advanced displays of the Chinese group BOE Technology, the first display group for iPhones, while the US technology giant is trying to reduce its costs and dependence on Korean Samsung Electronics.
IPhone maker "aggressively tests" BOE's Organic Light Emitting Screens (OLEDs), sources at Nikkei Asian Review said, citing the possibility that Apple could for the first time this advanced display technology in China. Apple will decide by the end of this year if BOE will become the most expensive supplier of its components, they said.
BOE's entry into one of the most demanding smartphone supply chains in the world would mark a huge leap forward for the Chinese billboard industry, which has received billions of dollars in public and public support in the last ten years. Beijing has strengthened the sector with grants and subsidies to advance its industry in the consumer electronics value chain.
The OLED market is also expected to grow rapidly in the near future, rising from $ 25.5 billion last year to more than $ 30 billion this year, according to IDTechEx Research.
These advanced displays use an electric current through thin layers of organic materials to generate light and consume less energy. They not only provide better contrast and color, thinner smartphones and foldable screens, but can also be used in portable devices and other electronic devices.
Neither American screen makers nor Japanese manufacturers have been able to provide Apple with sufficiently high quality OLED technology.
The iPhone maker currently buys OLEDs in Samsung, South Korea, which dominates the global market for high-end displays with a market share of over 90%, and LG Display.
The entry of BOE as an OLED provider could threaten Samsung Display's position and give Apple more bargaining power to obtain price reductions from suppliers in the South Koran. BOE, which began producing flexible OLED displays at the end of 2017, is also supplying advanced displays to Huawei's revolutionary smartphone Mate X, rival of the Samsung Galaxy Fold.
However, BOE is still vulnerable to possible repression in the United States, where companies such as Corning, 3M and Applied Materials provide the most critical materials and equipment for the manufacture of these screens. Any attempt by the United States to reduce shipments to BOE – as Washington had done to Huawei Technologies – could hurt the Chinese display champion.
Apple is currently testing BOE's flexible OLED displays at the Chinese company's facility in Chengdu, Sichuan Province, the first Chinese site to produce such advanced displays, two sources at the Nikkei said. BOE is also building another facility in Sichuan Province, which would be awarded to Apple if it places orders, said the population.
Apple is expected to produce at least two iPhones with OLED displays by 2020, sources said. The California technician is also considering OLED screens for all new models expected to be unveiled next September, three sources said.
Two sources familiar with the situation said that BOE would likely provide the new iPhones next year if it achieved certification. But he could first be asked to offer screens for repair purposes, as well as panels for older models of the iPhone, suggested a source. That would be a big step for BOE, the source said, as Apple's first-ever purchase of Chinese-made OLED displays.
The OLED screen is the most expensive component of the iPhone. It accounted for $ 110, or nearly 30% of the total cost of $ 370.25 from the iPhone X, the first iPhone OLED, in 2017, according to IHS Markit's report. The cost of the OLED display climbed to $ 120 the next year on iPhone XS Max because of the larger screen. OLED screens made by BOE could be 20% cheaper than Samsung's products, according to one of the sources close to the debate.
The high cost of OLED panels is due to the heavy capital investment required. Compared to a standardized LCD production line (LCD) for smartphones, an OLED panel installation could cost twice as much, for an amount of about $ 6.5 billion. Samsung dominates this sector since it's using OLED in its own smartphones in 2009. LG Display, one of the leading OLED providers for Apple, is experiencing more and more losses in its panel industry. One wonders if he would be willing to invest more, which would leave Apple hostage to Samsung. Most Taiwanese and Japanese suppliers have stopped investing in OLED screens.
"Apple has interest in qualifying a new supplier of OLED screen as [others] Eric Chiou, an experienced analyst at the Taipei-based WitsView research firm, is reluctant to invest too much to develop his capabilities. This gives BOE a good opportunity to break into this new market while the Chinese company is able to provide MacBook, iPad, HP and Dell displays. This should not be too unexpected if Apple also buys OLEDs from BOE. "
BOE was founded in 1993 in Beijing as a former supplier of military and defense equipment. In his early days, he struggled to compete with the quality of LCD executives in South Korea, Japan and Taiwan. However, generous government subsidies have helped this sector and the rest of the display industry. According to the research of Nikkei Asian Review, BOE received more than 2 billion yuan of subsidies last year.
Thanks to this important support, the very little known BOE has gradually become an aggressive competitor of other Asian suppliers over the last 10 years.
In 2018, the Beijing-based company opened the world's first 10.5 generation LCD production line – the largest in the market. It has also become the largest supplier of LCD screens in the world after shipping the same year. Its turnover was multiplied by 10 to reach 97.1 billion yuan ($ 13.81 billion) between 2008 and 2018 and is now the supplier of many leading technology companies, including the Chinese TV brand Hisense, Lenovo Group, HP and Dell.
Since 2017, BOE has been supplying LCDs to Apple for its MacBooks and iPads, adding to the pressure on established players such as Samsung Display, LG Display, JDI, Sharp and AU Optoelectronics of Taiwan.
Apple and BOE have not responded to the comment request of the Nikkei Asian Review.
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