The `yellow light` is ON for the Korean parts industry as Apple is trying to increase the parts self-sufficiency rate. Although Korean semiconductor and display along with camera module are supplied to the iPhone 8, to be launched in the second half of this year, the Korean electronic part industry needs to have a preemptive response as the situation might change after the iPhone 9 (tentative name).

According to the Taipei Times, Taiwan on April 19, Apple will produce micro LED panels at its Taoyuan plant in Taiwan from the end of this year and apply it to the new Apple Watch 3 (tentative) smart watch.

The micro LED is the next generation display that follows the Organic Light Emitting Diode (OLED). The chip size is only 5 ~ 10㎛, which is advantageous for miniaturization and weight reduction. Apple is reported to have been preparing for R & D and mass production of the US micro LED maker LuxVue in 2014.

In the case of Apple applies Apple LED micro-LEDs to Apple watch 3, LG Display, which has been the exclusive source of OLED for this product, may get affected. The industry expects that if Apple applies its panels on Apple`s watch, Korean electronic part sales will drop by more than KRW 230 billion.

Apple watches are not a big deal as they are not supplied in big volume, but the problem is when Apple applies its micro LEDs to its smartphones. Apple first applies OLED to Apple`s watch and proceed with test. Then the company may apply the OLED to the iPhone 8, which will launch in the second half of the year. Apple watches are likely to test micro LEDs and apply them to smartphones. This will affect Samsung Display, which supplies OLEDs to the iPhone 8, as well as LG Display, which is likely to supply OLEDs to Apple. The supply volumve is estimated to reach KRW 1.2 trillion on annual basis. Especially, Apple is likely to apply OLED panel of BOE from China to launch iPhone 9 next year, and China Star is also proceeding to deal with Apple, so Korean OLED industry may face sandwich situation.

DRAM and NAND flash memory supplied by Samsung Electronics and SK Hynix to Apple`s iPhone are also threatened. Apple is reported to have been in a deal with Foxconn and Sharp to take over Toshiba memory. It is stated that Apple has written an unbelievable price of KRW 30 trillion for acquisition. Apple is believed to acquire Toshiba to build a stable NAND flash supply chain and strengthen its cost competitiveness. According to Bloomberg news agency, earlier, Apple has been developing its own power management semiconductor chip from Dialog Semiconductor and has 80 engineers in the department and parts will be installed in the iPhone released in 2019. Apple also stated that the company has developed its own Graphics Processing Unit (GPU) on April 3 and will stop using graphics technology from Imagination Technologies in the next two years. It is possible that Korean semiconductor companies may face a similar situation.

There are concerns that LG Innotek, which supplies dual cameras for iPhone 8, cannot be relieved by Apple. LG Innotek`s sluggish performance last year was largely due to sluggish camera module business caused by weak iPhone sales. The company`s 70% camera module sales depend on Apple.

The industry predicts that Apple has steadily worked on its own to develop parts and diversify its supply sources. Although, Korean parts makers are estimated to make more than KRW 3 trillion in annual sales from Apple, this condition is likely to end in two to three years. In particular, it is a concern that China is pursuing Korea rapidly in the semiconductor and display fields.

An expert in the electronics industry pointed out, ‘Although Korean electric parts makers are currently enjoying a boom in Apple, they may soon face a crisis due to Apple. The crisis should be dispersed through diversification of parts suppliers. But it is not an easy circumstance now due to attitude of China towards THAAD and worldwide protectionism.’

By Park Seul Gee seul@


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