It seems Apple Inc. AAPL is making an earnest effort to become self-dependent in designing the key components for its products. According to Bloomberg, the company for the first time has started designing, developing and producing its own device displays at a manufacturing base near its California headquarters.
The tech behemoth has already started manufacturing a small number of screens starting with its Apple Watch. Naturally, this development is a serious concern for a number of suppliers such as screen makers Samsung Electronics Co., LG Display Co., Ltd. LPL and Sharp Corp., and chip-screen interface producers like Synaptics Inc. SYNA, as it could hurt their market share in the long term.
Apple Secretly Developing MicroLED Screens
Apple has secretly been making significant progress in becoming self-reliant when it comes to producing device displays. Per Bloomberg, the company has been making huge investments in the development of next-generation MicroLED screens, a technology that not only promises to make gadgets slimmer and brighter in the futures but also assures less power consumption.
MicroLED screens are different from OLED displays, as these use different light-emitting compounds. However, producing MicroLED screens is an intricate process compared with OLED display and could take a few more years to reach consumers.
In fact, given the complexity of producing MicroLED screens, it took several months for Apple to get its California plant operational and it was only in late 2017 that engineers were successful in manufacturing fully functional MicroLED screens for future Apple watches. The company intends to first make the new technology available for its wearable computers and is unlikely to be used in an iPhone before three-five years.
However, getting a firm grip over the MicroLED technology could help Apple dominate a maturing smartphone market after missing out on the OLED market. At the same, it will give stiff completion to companies like Samsung and LG Display that have so long successfully touted superior screens.
Moreover, Apple’s initiative to produce its own device displays might upset the entire projections made by the component suppliers. Apple has depended on suppliers like LG Display and Samsung for its OLED display screen. Given this scenario, these suppliers on assumptions of orders, had made significant investments on which its future revenues would depend. Whether Apple’s secret development will dishevel the revenue and growth projections of these component suppliers is something to look out for.
Apple’s Move Could Intensify Competition
Most smartphones and other gadgets generally use off-the-shelf display technology. Apple has not been proactive in manufacturing its own device displays. Hence, the company’s initiative toward manufacturing a screen of its own could be cause for concern for a number of the present-day screen makers.
Understandably, this move is an indication that Apple wants to be more self-sufficient by producing display components in house and at the same time cut into the market share of prominent screen makers and chip-screen interface producers. Shares of Samsung, LG Display and Sharp fell sharply after the report came out.
Apple depends on a network of suppliers like Samsung which produces OLED panels for iPhone X, the company’s first OLED phone. Phone manufacturers often tweak screens to suit their specifications. Apple has been calibrating iPhone screens for color accuracy for years now. Also, the Apple Watch screen is made by LG Display.
Similarly, Alphabet Inc.’s GOOGL Google, a part of the FAANG group that also includes Facebook, Inc. FB, Apple, Amazon.com, Inc. AMZN, Netflix, Inc. NFXL and Google, uses OLED screens manufactured by LG Display for its larger Pixel phone.
While Samsung’s shares were down 0.51% as of Asia morning trade, LG Display was down 0.89%.
However, this is the first time that Apple has started designing and developing screens completely by itself. Moreover, the technology is new and could be a game changer that could benefit Apple and at the same time intensify competition. Apple has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Apple may surely have raised concerns among its rivals but consumers need to wait for some time till the technology reaches them, as producing MicroLED screens is a complicated process. However, it is a giant leap for a company like Apple given that it has so far only produced processors in house, while the company’s policy has been to outsource components for most of its products.
In fact, Apple is not known to have focused much on the screen size of its devices, an area where a number of brands scored with their super-sized devices. However, that too seems to be changing with the company now having decided to launch three iPhones, the largest of which will have a 6.5-inch screen when measured diagonally.
That said, MicroLED is a new technology and the initiative could give Apple the first-mover advantage. Moreover, Apple has been a late adopter of technologies unlike Samsung, but this move is an indication that the company has started thinking differently and MicroLED may possibly be just one of the many steps it takes in the future.
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