Two themes have dominated tech industry news the past few weeks: Samsung Electronics’ (OTCMKTS:SSNLF) faster-than-expected recovery from its Galaxy Note 7 exploding battery disaster and Apple Inc.’s (NASDAQ:AAPL) track record of punishing iPhone component suppliers.
The two stories converge in a new report out of Korea alleging that Apple is working on micro-LED display technology to replace the OLED panels it’s expected to buy from Samsung. It’s also in talks to replace Samsung as its iPhone memory supplier.
Samsung is expected to be the primary supplier for the iPhone 8, providing the NAND flash memory, DRAM and the OLED display panels. But if Apple follows through with its plans, it may manage to purge Samsung altogether from its most popular product.
Apple Inc.’s Quiet Investment in Micro-LED
In 2014, Apple bought LuxVue Technology. The small company was working on low power, micro-LED displays for consumer electronics. No one read a whole lot into the purchase, as Apple had acquired 24 small tech companies during an 18-month period at the time.
Business Korea reports that Apple Inc. is preparing to put micro-LED displays into mass production late in 2017, however, using them for the Apple Watch 3. They would replace the OLED displays used in the first two models, with the advantage of being thinner and lighter. As a result, LG — the supplier of those Apple Watch OLED displays — is expected to take a $200 million-plus hit.
The bigger story is OLED displays for iPhones. AAPL is expected to turn to OLED displays for the iPhone 8, and Samsung has reportedly invested billions of dollars to ramp up its production capacity to meet demand. According to the Business Korea story, if the Apple Watch 3 display is a success, Apple plans to leverage the technology to use its own micro-LED displays on iPhones, replacing OLED.
Besides being thinner and lighter, AppleInsider points out that AAPL and LuxVue are working on the ability for micro-LED displays to integrate Touch ID capability. Issues around Touch ID with OLED displays and the removal of the Home button are largely being blamed for apparent iPhone 8 production delays. If Apple Inc. can solve that problem using its own technology, that’s just another reason to ditch OLED.
Kicking Samsung Out of the Henhouse
Business Korea also points out another Apple move: The company is bidding on the memory chip business of Toshiba Corp NPV (OTCMKTS:TOSBF). If successful, that means Apple would be able to replace Samsung memory chips with its own in future iPhones.
I’ve written recently about Apple’s push to move key iPhone components in-house, sometimes pulling the rug out from under long-time suppliers. Even a massive company like Samsung takes risks when it deals with Apple. The payoff can be huge — that’s why Samsung is willing to build up manufacturing capacity for iPhone 8 OLED displays. But Samsung isn’t immune from Apple’s strategy.
In fact, with the Galaxy S8 doing unexpectedly well, even as Samsung technology is fingered as a possible cause for iPhone 8 delays, SSNLF has a target on its back. If the micro-LED displays for the Apple Watch 3 perform well, Samsung had better start making alternate plans for its ramped up OLED capacity.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.