Screens, chips: Why Apple is increasingly breaking away from its suppliers

Posted Jan 18, 2023 12:26pmUpdated January 18, 2023 at 12:27 p.m

Finished products like iPhones, content from movies to series… and even electronic components. Apple is increasingly attempting to produce the small parts essential to its devices in-house. This week, the group took a new step, unveiling its two latest generation chips, the M2 Pro and more specifically the M2 Max. Its presentation goes in one direction: according to Apple, the chip would be “the most powerful and energy efficient in the world”. Thanks to this, the new Macbook Pro would offer performance that is six times higher than competing laptops running on Intel’s most advanced chip.

Intel is far from the only one affected by this desire for autonomy. Apple is collaborating today more than 190 providers in 50 countries. Including LG, Sony, Samsung… But Tim Cook’s group wants to make itself independent of several technological building blocks. So by 2024 or 2025, Apple could have its own modem (the chip that makes it possible to make phone calls or connect to Wi-Fi) built into the iPhone. If the project goes through, Qualcomm and Broadcom could well drink the cup. The two manufacturers each make 20% of their sales with Apple, i.e. $10 billion and $7 billion respectively.

In 2024 or 2025, Apple could also replace the slab (the screen under the glass) on its Apple Watch with its own slabs, and then do the same on the iPhone. Incidentally, Apple would switch from OLED technology to microLED, which allows for much brighter and less energy-consuming screens, but costs about twice as much. “Apple has invested more than $2 billion in micro-LEDs,” recalls Eric Virey, senior displays analyst at Yole Intelligence in California. They will be the first to use this technology. No one else has made the necessary investments. »

Reduce hazards

This empowerment strategy, which Samsung and Huawei are also doing, especially since the American sanctions, is not new. 30 years ago, every phone manufacturer designed their own chips. The model became horizontal during the transition to 3G, which allowed the rise of Qualcomm or Intel. But manufacturers are now returning to a certain form of verticality.

For example, Apple has been working on its modem since at least 2018. To put the odds on his side The group even bought Intel’s modem business for $1 billion in 2019. Its efforts in microLED screens date back to 2014 when Apple bought start-up LuxVue.

Some Apple products are already running on proprietary products. All Mac computers work well with M1, M1 Max, M1 Ultra and M2 processors. Only the Mac Pro for 6,500 euros still runs with Intel. The iPhone 13 and beyond all feature Apple’s A15 or A16 chip. These chips are designed by Apple but technically manufactured by Taiwanese giant TSMC. Similarly, micro-LEDs can be made by German Osram but assembled by Apple.

The disruption to supply chains since the pandemic is now pushing Apple to become even stronger. By internalizing the apple brand reduces risks and better controls the chain. Apple also achieves more value and can differentiate itself with technological leaps. “The goal is a proprietary technology. When it comes to screens, Apple is heavily dependent on Samsung. However, the South Korean is a smartphone manufacturer itself and therefore a direct competitor,” Eric Virey recalls.

Allocate R&D costs

Apple’s economic and symbolic weight means that the group can easily impose its conditions on subcontractors. In fact, it often takes precedence over other large contractors. However, Apple is not immune to geopolitical turmoil, particularly between the United States and China. The brand assembles almost all of its iPhones there. iPhone shipments for the quarter are also set to fall 14% year over year as Covid cases rise in China.

Empowerment, however, is far from being a calm river. “A few years ago, Apple invested $2 billion in Sapphire to replace screen glass. Everything collapsed within 8 months,” recalls Eric Virey. Internalization also requires more and more sales to spread the huge R&D costs. However, the market for smartphones and PCs looks bleak. One question remains: will Apple go as far as selling these technologies to the rest of the industry like Samsung? Not as long as these components offer a priori a competitive advantage. But in the world of technology, everything moves very quickly…

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