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Samsung to Slash OLED Panel Production on ‘Weak Demand’ for iPhone X, Claims Nikkei

Samsung plans to slash its OLED panel output in response to Apple's decision to cut production of iPhone X due to "weak demand", the Nikkei Asian Review reported on Tuesday. Samsung will make OLED panels for 20 million fewer iPhones at its South Chungcheong plant in the January to March quarter, a lot lower than its original goal of supplying panels for 45 million to 50 million iPhones, according to the paper.

Samsung is said to have made a 13.5 trillion won ($12.6 billion) capital investment in anticipation of the originally expected number of OLED panel orders from Apple. The new target reportedly reduces plant production to roughly 60 percent of original forecasts, and Samsung's display business is expected to suffer revenue declines for the first half of 2018. Samsung stock fell as much as 2.3 percent in morning trade, reported Reuters, while shares of some Japanese OLED component makers also declined.

Today's report follows previous claims by Nikkei that "weak demand" for iPhone X has forced Apple to slash its production target by half in the three month period from January. However the claim doesn't tally with Apple's own results reported at its recent quarterly conference call earlier this month, and it's unclear which supply chain sources the publication is relying on. Apple CEO Tim Cook has dismissed these types of reports in the past, suggesting that the company's supply chain is very complex and that any singular data point is not a reliable indicator of what's actually going on.

During its record financial results report for the first fiscal quarter of 2018 (which corresponds to the fourth calendar quarter of 2017), Cook said the iPhone X was the top-selling iPhone model every week since it had debuted in November. iPhone shipments were down 1.2 percent year-over-year compared to the year-ago quarter, but only because of an extra sales week last year – Apple's growth was actually 21 percent year-over-year on an adjusted basis.

Related Roundup: 2018 iPhones

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Apple’s Decision to Slash iPhone X Production Volume in Q1 2018 Could Delay Future OLED Models

Apple is set to half its 40 million iPhone X production target in the three month period from January, reported Nikkei Asian Review on Monday without naming a source.

The U.S. tech giant notified suppliers that it had decided to cut the target for the period to around 20 million units, in light of slower-than-expected sales in the year-end holiday shopping season in key markets such as Europe, the U.S. and China.

The iPhone X, Apple's first smartphone equipped with an organic light-emitting diode display, has failed to catch on globally -- something many put down to a price tag starting at $999.
Part of the reason for the high price tag of iPhone X is said to be down to the cost of OLED panels made by Samsung, which is the only supplier of the component that can guarantee Apple a steady supply of the screens. According to Nikkei, Apple is now considering an increase to the proportion of LCD iPhone models by reducing production of the OLED screen models scheduled for release this year.

Apple is expected to launch a trio of new iPhone models in 2018, including 5.8-inch and 6.5-inch models with OLED displays and a 6.1-inch model with an LCD display, according to KGI Securities. However, at least one analyst has predicted that the LCD-to-OLED ratio this year will actually be 2:1. DigiTimes' Luke Lin believes Apple is increasingly leaning towards releasing two LCD-based models and a single larger 6.4- to 6.5-inch OLED model. Today's Nikkei report claims lackluster sales for iPhone X could result in a delay to the company's plans to introduce OLED screens in other models, which could potentially add weight to DigiTimes' prediction.
The production cuts for the X will have a domino effect on manufacturers that have supplied high-performance components for the handset, with the combined impact expected to run into billions of dollars. It could also slow down the shift at display manufacturers from LCD to OLED technology.
Nikkei added that Apple is expected to maintain a total production target of 30 million units for lower priced models such as the iPhone 8, iPhone 8 Plus and iPhone 7. Apple Japan replied to Nikkei's request for comment by stating that it would confirm the details with headquarters.

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Taiwanese Apple Suppliers Face Falling Stock Prices Amid Ongoing Concern Over Weakened iPhone X Demand

Three major Apple suppliers faced falling stock prices on the Nikkei Asia300 Index today, believed to be directly related to "concerns over demand for iPhone X." The three Taiwanese suppliers were Largan Precision, Hon Hai Precision Industry (Foxconn), and Taiwan Semiconductor Manufacturing Company, dropping 4.4 percent, 1 percent, and 3 percent on the index, respectively.

iPhone X demand concerns and decline in supplier stock prices came after the latest analyst report by JP Morgan yesterday, predicting "slashed" iPhone X orders in the first part of 2018. In a research note reported by CNBC, analyst Narci Chang said "high-end smartphones are clearly hitting a plateau this year," singling out Apple by forecasting that iPhone X manufacturing "might be down 50 percent quarter-over-quarter."

Reports of "weakened" iPhone X demand heading into 2018 began emerging late last year, mainly stemming from analyst belief that the high price of the device would eventually lead to reduced sales after early adopters got their iPhone X. These reports have caused several Apple suppliers to be anxious over low order visibility for the full range of iPhone 8, iPhone 8 Plus, and iPhone X models in Q1 2018. CLSA analyst Nicolas Baratte argued that the reported reduction of the iPhone X's Q1 2018 shipment forecast from 50 million units down to 30 million units "remains inflated."

Despite multiple stories about the iPhone X's plateaued demand in early 2018, the smartphone is believed to have sold well following its fall launch in 2017 and throughout the holiday season. Research data shared just yesterday by Canalys reported that Apple shipped 29 million iPhone X units in Q4 2017, making the device the "world's best-shipping smartphone model over the holidays."

Earlier in January, Kantar Worldpanel said that the iPhone X saw "stellar" performance in several countries during November of last year, though it was outsold by the iPhone 8 and the iPhone 8 Plus in the United States. Combined, Apple's three new iPhones captured the top spots for best-selling smartphone models during the month. Kantar's global OS data pointed towards "staggering" demand for the iPhone X in China from users said to be switching sides from rival smartphone makers.

We should get a better view of how the iPhone X sold soon, when Apple reveals its earnings results for the first fiscal quarter of 2018 on Thursday, February 1.

Related Roundup: iPhone X
Buyer's Guide: iPhone X (Buy Now)

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iPhone Batteries Could Have Apple-Designed Power Management Chips Within Two Years

Apple is designing its own power management chips for use in iPhones within the next two years, according to Nikkei Asian Review.
Apple's new in-house power management chip would be the most advanced in the industry, according to the sources, and could have processing capabilities that allow it to better monitor and control power consumption among various components. That means iPhone users could expect devices capable of delivering better performance on lower power consumption.
Apple plans to replace around half of the main power management chips that go into iPhones with its own as early as 2018, but the transition could be delayed until 2019, according to anonymous sources cited in the report.

If the report is accurate, it could be a serious blow for Dialog Semiconductor, the British company that exclusively designs the current main power management chip for iPhone, iPad, and Apple Watch models. Apple reportedly accounted for nearly three quarters of Dialog Semiconductor's revenue in 2016.

The main power management chip controls an iPhone's battery, including charging capabilities and energy consumption. Apple's in-house version will supposedly be "the most advanced in the industry," which could pave the way for future iPhone models to have a better performance-to-battery life balance.

Taiwanese supplier TSMC will be the exclusive manufacturer of Apple's in-house power management chip, according to the report.

Today's report corroborates a prediction by Bankhaus Lampe analyst Karsten Iltgen, who earlier this year said that Apple will at least partially cut back on Dialog Semiconductor's supply of power management chips for future iPhones. Iltgen said Apple already has engineers working on the chips in California and Germany.

Dialog responded to the report with a statement claiming that "business relationships are in line with the normal course of business."

Dialog Semiconductor could be the second large British company to lose significant business from Apple within the next year or two. In April, Imagination Technologies shares plunged after Apple informed the firm it plans to stop using its PowerVR graphics technology in its devices within two years.

Apple appears to be moving towards in-house design of several components, potentially including ARM-based Mac processors and iPhone modems.

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Supply Chain Hints at Apple Releasing Augmented Reality Headset No Later Than 2019

Taiwanese manufacturer Quanta Computer, a primary assembler of the Apple Watch, has revealed that it is working on an augmented reality product for an undisclosed company that some industry observers believe is Apple.

Google Glass Enterprise Edition

Quanta's vice chairman C.C. Leung suggested the device will be a "headset-like gadget with a fully transparent lens that allows users to see through and interact with the environment," according to Nikkei Asian Review.

"Currently, we see such a device available in the market no later than the year 2019," he told reporters after the company's earnings conference.

Leung noted that if an augmented reality device could carry a price tag lower than $1,000, it would likely become a hit in the market, although it is unlikely he has any knowledge of Apple's pricing plans if they even exist yet.

Quanta is the second Apple supplier to mention involvement with an augmented reality product after fellow Taiwanese company Catcher Technology said it has been tapped to supply parts for an undisclosed wearable device.

Bloomberg was among the first to report on Apple's work on an augmented reality headset. It said Apple aims to have the technology ready by 2019, and could ship a finished product as early as 2020, which is a slightly longer timeline.

The headset's custom operating system, based on iOS, is reportedly dubbed "rOS" for "reality operating system."

Apple hasn't finalized how users will control the headset and launch apps, but it is investigating touchscreens, Siri voice activation, and head gestures as it creates prototypes, the report said.

Apple CEO Tim Cook alluded to any headset being at least a few years away during a recent interview about augmented reality.

"Today I can tell you that the technology itself doesn't exist to do that in a quality way," Cook said. "We don't give a rats about being first, we want to be best in creating people's experiences. Something that you would see out in the market any time soon would not be something that any of us would be satisfied with."

Cook has repeatedly expressed a "profound interest" in augmented reality, which he favors over virtual reality. Apple's ARKit platform on iOS 11 enables developers to integrate augmented reality features into iPhone and iPad apps, potentially laying the foundation for what's to come.

Related Roundup: Apple VR Project

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