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Apple pays the price to stay on the verge of bleeding



(Bloomberg Opinion) – Apple Inc. could invest nearly $ 1 billion just to keep its devices at the cutting edge of technology.

Japan Display Inc., one of its leading screen providers, announced Friday morning that it would reap up to $ 400 million from the rescue partner, Harvest Tech Investment Management Co. The result of this two-page stock market announcement was the revelation that the $ 100 million financing already committed by a client.

This customer is Apple, according to a Bloomberg News article published late June. Taiwan-based TPK Holding Co., another long-standing iPhone components provider, was in talks to join a $ 1.1 billion bailout package for Japan Display, but withdrew. This forced the company to look elsewhere and Apple stepped in to help fill the void.

The move comes a week after Apple's lead supplier, Samsung Electronics Co., made a cryptic reference to a "one-time gain related to the screen sector" in its preliminary report of the second quarter results. The US company will shell out up to 1 trillion won ($ 850 million) to offset the shortfall in organic light-emitting diode (OLED) purchases, according to the South Korean newspaper Electronics Times and analysts at Citigroup Global Markets. (Apple did not respond to a request for comment at the time of publication Friday.)

What is interesting in these two cases is that none of the payments seems to be intended for the direct purchase of components. They simply have to support or compensate the suppliers that Apple uses to make the most advanced screens available. Samsung is one of the companies that preceded Apple by incorporating OLED screens into smartphones, but the iPhone maker is the only one to buy them in the tens of millions. To do this, the display division of Samsung relies on him.

Apple has probably blocked this offer by promising to buy a minimum amount, and it may have fallen short of the recent weakness of iPhone growth. At the same time, the American society desperately needs alternative sources to not be beholden to a single supplier. The Japanese company said its operating loss of 20.4 billion yen ($ 188 million) in March was larger than the previous period "due to R & D spending on production preparation in bulk of OLED ".

The fact that Japan Display can create many OLED screens is great news for Apple, as long as it does not go to waste until that happens. Apple has an interest in keeping the company afloat.

With global smartphone brands looking for new ways to improve their offerings, it's critical that high-end devices, such as the iPhone, maintain their technological leadership. In times of economic slowdown, Apple begins to discover the price to pay to stay at the forefront of progress.

To contact the author of this story: Tim Culpan at tculpan1@bloomberg.net

To contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tim Culpan is an editorialist of Bloomberg Opinion on Technology. He previously covered technology for Bloomberg News.

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