Korea's Deep Paranoia is Setting in as Apple Considers a Supply Shift to China and Apple Watch 3 Shifts to Micro-LED
This morning a major Korean Tech site published a report detailing Korean suppliers becoming paranoid over Apple's potential shift to more Chinese suppliers over the next three years. Some of their points appears to be on solid footing while other aspects seem to be steeped in paranoia. Though along the way it slipped that they believe via fresh rumors that Apple is likely to shift to a Micro-LED display for Apple Watch 3.
The Korean tech report this morning notes that Apple is taking measures to raise the self-sufficiency rate of components and this is in turn is raising a cautionary flag with the South Korean component industry. A number of South Korean parts, such as semiconductors, displays and camera modules will be used in this year's iPhone 8 but that could begin to change as soon as the iPhone 9.
The report first points to 'media reports' claiming that Apple will begin mass production of micro-LED displays for the Apple Watch 3 at an unnamed plant in Taoyuan by the end of the year. Taoyuan is a special municipality in northwestern Republic of China, neighboring New Taipei City.
The report further notes that A micro-LED display, a next-generation display following an organic light-emitting diode (OLED), has a strong potential to be thinner and lighter because it measures only 5 to 10 micrometers. Apple will use LuxVe technology they acquired in 2014.
Once Apple uses micro-LED displays on the Apple Watch 3, the report states, LG Display, which has exclusively supplied OLEDs to Apple's smartwatches, will be hit hard. Industry sources said that domestic sales of OLED panels will decrease by more than 230 billion won (US$201.35 million) when Apple uses its panels on Apple Watches.
Of course the report failed to mention that Apple has recently requested LG take part in a bid for Apple's iPhone OLED business that would make up for any losses due a potential shift in the Apple Watch display away from LG.
Then the report ratchets up the paranoia by stating that "The damage is relatively not that serious due to a small quantity of Apple Watches. However, the problem becomes bigger when Apple decides to use micro-LED displays on its smartphones as well. Apple will use an OLED panel on the iPhone 8 to be launched in the second half of this year after testing the panel on the Apple Watch.
Considering such precedent, Apple is highly likely to use a micro-LED display on its smartphones after testing the panel on the Apple Watch. In this case, not only Samsung Display, which supplies OLEDs to the iPhone 8, but also LG Display, which is a potential supplier, will be affected. Their combined losses are estimated at 1.2 trillion won (US$1.05 billion) a year.
If that reality never pans out, they then play up that Apple is likely to use OLED panels produced by China's BOE on the iPhone 9 to hit the market next year and China Star is also pushing ahead with deals with Apple. The rumor of Apple in talks with BOE surfaced in February. Accordingly, the report notes, the South Korean OLED industry can be caught in the middle.
The report then rapidly shifts to flash memory. The report notes that "Samsung Electronics' and SK Hynix's supplies of DRAM and NAND flash memory chips to Apple's iPhones are also under threat. Apple has joined hands with Foxconn and Sharp to acquire Toshiba's memory business unit. As it offered an unbelievably high price of 30 trillion won (US$26.27 billion) for the unit, Apple has become a potential buyer. Apple plans to establish a stable NAND flash supply chain and strengthen the price competitiveness by taking over Toshiba."
The report went on to mention Apple's recent moves with Dialog Semiconductor and Imagination Technologies. The use of real developments hitting the news lately mixed in with 'what if' scenarios is how they create this sense of paranoia. The report claims that "some express concerns that LG Innotek, which supplies dual camera modules to the iPhone 8, can't be at ease. LG Innotek's poor performance last year was largely due to the decrease in camera module sales as sales of iPhones dropped. Apple accounts for 70 percent of the company's sales of camera modules."
The Korean report concludes that "Industry watchers said that Apple has been continuously making an effort to develop its own parts and diversify suppliers. Currently, sales of South Korean component producers from Apple are estimated at over 3 trillion won (US$2.63 billion) a year, but its prosperity from Apple is highly likely to end in two to three years. Notably, China is quickly chasing South Korea in the semiconductor and display sectors.
To be fair, Apple has caused a few ripples in their supply chain recently and that may be a tactic of Apple's to get lower prices on new contracts. A case in point is Imagination Technologies is likely to drop prices by two-thirds for the rest of Apple's current contract.
At the end of the day, Apple's recent moves may have gotten Korean suppliers and certain members of their tech press a little paranoid, but the leap to believing that Apple would ever put all or their supply eggs into a single basket, a single country is straight out paranoia.
At at time when the drum beat of war is in the press regarding North Korea, I don't think getting their citizenry riled up over Apple dumping Korean suppliers is the right thing to be doing at this time. Then again, if it gets their fan base to think of Apple as the bad guy it might get more South Koreans to rush out to buy a new Samsung Galaxy S8 instead of waiting for a new iPhone. And for a moment, it also gets their fan base off the topic of what will happen with Samsung's Chairman that's still on trial. Yes, deflection, it's a powerful tool of deception.