Apple leans toward LG as BOE struggles

Apple CEO Tim Cook, left, and LG Display CEO Jeong Ho-young / Korea Times file

LG’s chief Chinese rival BOE struggling to improve production yields

By Kim Yoo-chul

Apple, which is ramping up production of its latest iPhones and iPads, is leaning toward asking LG and Samsung’s display affiliates to supply more small and mid-sized OLED panels. The move comes as Chinese display manufacturer BOE continues to struggle to improve the quality of its small- and mid-sized OLED displays for use in Apple’s products.

Apple is proud of its stable product ecosystem and becoming a part of that system is considered as a badge of honor for high-tech companies, including the IT divisions of Samsung, LG and SK conglomerates as well as Chinese and Taiwanese firms such as Foxconn and BOE. Apple is notorious for its meticulous product-certification process and being included in its web-like supply chain means a supplier can improve the quality of the components it provides.

But because Apple has always been exploring alternatives in line with its decades-old strategy of diversifying its supply chain, it’s tough for Apple’s parts suppliers to expect higher profit margins. Also, it’s no surprise to see the Cupertino-based outfit asking its partners to operate “Apple-centric” production lines” that strictly adhere to its rules and guidelines.

Amid the ongoing COVID-19 pandemic, Apple is a client that suppliers cannot afford to lose as rising demand for iPads and iPhones and strong growth in the services business are set to drive Apple’s top line higher.

On Sunday, a senior industry executive who is familiar with Apple issues, told The Korea Times that Apple signed OLED agreements with LG Display and Samsung Display under which the two companies will be responsible for supplying Apple with small-sized OLED panels for the forthcoming iPad models.

LG catching up with Samsung

The central question is which company will be the primary supplier of OLED panels for Apple’s next iPads.

According to the executive, Samsung Display received the “majority of orders” by supplying some 120 million OLED panels to Apple for use in future iPads. One notable point is that, according to the executive, Apple has asked LG Display to more than double the amount of small- and mid-sized OLED panels it could supply.

“Regarding the question of who will be the main supplier, Samsung Display will keep the top status as it’s been set to supply 120 million OLED panels for future iPads. But Apple is leaning toward LG Display as LG won orders from Apple to supply 50 million OLED sheets for next-generation iPads, double the amount it received earlier,” said the executive by telephone.

“Despite Samsung’s dominance in the global small- and medium-sized OLED display segment, LG Display is catching up. LG plans to invest some 4 trillion won to increase the output of small- and medium-sized OLEDs, which I think is 30 percent higher than the planned investment by Samsung Display,” said another senior industry official asking not to be identified.

LG’s E6-3 line has been assigned to fabricate OLED displays for future iPads. LG already operates an E6-2 line, while both lines are located in Paju, near the North-South Korean border. The E6-2 and E6-3 lines produce components only for Apple. LG is on track to level up its transaction volume with Apple, in order to make up for a possible decline in demand for large-sized OLED panels during the protracted pandemic, said the executive.

Unlike his predecessor, LG Display CEO Jeong Ho-young has been focusing on improving the company’s competitiveness in small- and medium-sized OLED displays due to problems faced by Chinese handset vendors and Samsung Electronics’ dual-strategy of pursuing an OLED- and LCD-oriented mobile phone business.

iPads are by far the most popular tablets with market research firms estimating that Apple shipped some 13 million of the products during the first quarter of this year alone. LG’s main Chinese rival, BOE, was said to have won some OLED displays orders from Apple for use in refurbished models. One source said BOE was struggling to stabilize “touch-incorporated” OLED technology in terms of production yields.

Apple plans to release the 5.4-inch iPhone 13 mini, 6.1-inch iPhone 13, 6.1-inch iPhone 13 Pro and 6.7-inch iPhone 13 Pro Max models by the end of this year. All of these soon-to-be-released devices will use OLED displays. OLED panels for use in budget and mini iPhones models will use LG Display OLED panels while both high-end and flexible iPhone models will use Samsung Display OLED panels.