According to a recent report by Ben Lovejoy at 925mac, Chinese display manufacturer, BOE is in very hot water after being caught trying to cut corners. Apple outsources its phone displays to other companies. Samsung is in the lead with LG following behind, while BOE comes in third. Despite this, they still were hoping to fulfill an order of 40M OLED screens across various models.
Struggle to Meet Demand
A month ago, the LEC reported that BOE was struggling to meet demand. This was due to 3 primary reasons.
A) The global chip shortage has hit the display driver chip industry particularly hard. Samsung has its own Chip making company called Samsung System LSI, which it uses to supply itself. On the other hand, LG and BOE both share the same chip supplier – LX Semicon. Given the choice, LX Semicon had elected to supply LG before BOE. This left BOE in a crunch.
B) Simultaneously, the yield rate – which is the rate of how much percent of a manufacturer’s production are fit to sell was lower than expected. Apple is notoriously stringent in their quality control requirements, and even Samsung has a lower yield rate for their Apple contracts vs general production. However, BOE was doing even worse than usual.
C) At the same time that all this was going on, one of their new factories was delivering a low factory operation rate. The report does not say why, but we must speculate that the extreme Chinese Covid lockdowns are playing a role.
Desperate Measures
All this left BOE struggling to meet its commitments to Apple. The story took a strange turn last week after it was reported that BOE had secretly made changes to the design of the circuitry without approval from Apple. When they were discovered, they sent some C level executives to try to explain themselves. Apparently, that did not go over too well with Apple either.
As a result, BOE has been cut out of the iPhone 14 orders altogether and its initial 30M order (prior to them raising it to 40M) was handed to Samsung instead. It is extremely unlikely that Samsung will be able to fulfill both their initial order and this one so expect shortages on the iPhone 14. It is unclear however, whether BOE will be permanently banned or whether they will be allowed back for future releases.
I find it interesting how in the “Smart Phone Wars”, everything is connected, and how even when purchasing an iPhone, their direct competitor (Samsung) directly benefits from each purchase. The real-life ramifications of the Geopolitics such as Covid Lockdowns and chip shortages are also fascinating to me.