If all goes well, Samsung could end up being the sole supplier of display for the iPhone that is scheduled to hit the markets in 2017 i.e. iPhone 7S. Apple and Samsung have inked the deal where the Korean conglomerate will supplier displays to Apple by incorporating OLED technology into it.
Apple is considering the transition from the IPS LCD to OLED in the future iPhone due to the thin design, colour superiority and power efficiency of this technology. Many manufacturers competed for this contract but Apple has chosen Samsung as it has enough muscles to meet the large scale demand.
But for that to happen, Samsung first needs to upgrade its existing facility or build a new one. the current capacity of Samsung display is at 3 million screens a month that transforms into 36 million units a year. For comparisons, Apple sold 231 million iPhones last year. The upgrade bill is estimated to be at $8.7 billion and Samsung is more than willing to spend the amount as the return in the futures will be multiple time the initial capital.
This contract would bring in substantial profits to Samsung which has been battling the smartphone sales decline for 2 years now. Samsung would be depending on other units such as semiconductor and display for it profit growth rather than the sole smartphone division that has been stumbling for quite a while.
“It looks like a huge investment risk for Samsung at first, but it will pay off handsomely,” said Greg Roh, an analyst at HMC Investment Securities in Seoul. “Once Apple adopts the new display; others can’t help but follow.”
“It’s great news for Samsung,” Seoul-based HI Investment & Securities Co analyst Chung Won-suk said of the potential Apple supply deal. “Samsung will exclusively get the initial orders from Apple in late 2017 for the flagship lines and it will get the price premium”
LG is also believed to be competing for the contract but is unlike to get it while Samsung is in the game. Maybe it could pick up the bones after the lion has had its share of the meat.
