San Francisco - Apple is in discussions with China’s BOE
Technology Group to supply next-generation displays for future iPhones, a
key component that’s being provided by a Samsung Electronics unit, people
familiar with the matter said.
Apple’s been testing BOE’s active-matrix organic
light-emitting diode screens for months but hasn’t decided if it’ll add the
Chinese company to its roster of suppliers, one of the people said, asking not
to be named talking about private negotiations. BOE, one of the country’s
largest screen makers, is spending close to 100 billion yuan ($14.5 billion)
building two AMOLED plants in the southwestern province of Sichuan in
anticipation of future business. Talks are at an early stage and it’s unlikely
to supply the next iPhone, but BOE is banking on outfitting the one in 2018 or
later, the person said.
If BOE is selected for OLED, it will become the first
known future supplier of the next-generation screens to Apple outside of South
Korea and Japan -- a triumph for a Beijing-based company best known for
computer and TV displays. The US company is exploring alternatives to address a
global shortage of OLED displays as it prepares to adopt the sharper, more
power-efficient technology for its next iPhones, catching up with rivals such
as Samsung and Huawei Technologies.
Apple declined to comment, and BOE declined to comment on
talks with customers.
Expensive
component
The display is one of the most expensive components of a
smartphone. OLED screens are more difficult to produce, making Apple beholden
to suppliers still working to manufacture the displays in mass quantities. The
world’s four biggest suppliers of smartphone displays -- Samsung Display Co.,
Sharp, LG Display and Japan Display -- are said to have insufficient capacity
to equip all new iPhones this year, a constraint that may persist into 2018.
That means Apple may be forced to adopt OLED in just a single version of its
device this year, the 10th anniversary of the smartphone’s debut.
“It’s an opportunity for BOE as Apple is known to seek
multiple suppliers for one component,” said James Yan, research director for
Counterpoint Research in Beijing. “But it’s unlikely to challenge Samsung
because it is able to roll out high-quality screens at a steady capacity.”
BOE’s shares had climbed 1.3 percent in Shenzhen by
midday, outperforming a mostly unchanged benchmark A-share index.
Founded in 1993 after employees took over an ailing
producer of electron tubes, Beijing-based BOE is the world’s largest
manufacturer of LCD panels by market value, according to data compiled by
Bloomberg. BOE, which started out as Beijing Orient and enjoyed the support of
a government keen to champion local technology players, is now building a 46.5
billion-yuan flexible AMOLED plant in Chengdu.
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While it’s ramping up capacity, it’s likely to miss the
next iPhone. That sixth-generation factory won’t crank out a single screen till
the summer, while new iPhones typically go on sale in the fall. When that
plant is up to full capacity, it’ll be able to put out 48 000 glass substrates
a month, BOE said in an e-mailed statement, referring to the thin surfaces from
which screens are carved out.
Another plant in Mianyang with the same capacity and
investment is expected to start production only about two years later. The
company currently operates only a small OLED factory in remote Inner Mongolia.
Eventually, when its two plants are up and running, it expects to be able to
manufacture 1.6 million square-meters of flexible AMOLED glass substrates a
year, slightly more than researcher IHS’ estimate for total global production
in 2016.
Apple typically introduces new technologies for its
iPhones across all models when they’re unveiled, usually in September, as it
did with 3D Touch and Apple Pay. Using different core, user-facing technology
in the same iPhone generation would be an unusual step. All iPhone 7 models
have liquid-crystal display screens.
The US company and Samsung have an exclusive OLED supply
deal covering 2017, people with knowledge of the agreement have said. Yet that
doesn’t guarantee the South Korean technology giant can make enough displays to
sate iPhone demand, particularly given Samsung needs to outfit its own slate of
upcoming gadgets. Some analysts estimate that Apple could sell as many as 90
million iPhones in the last three months of 2017 alone.