Apple likely to be reliant on Korean display makers despite independence: Report

Apple Inc.‘s iPhone 14 series [Photo by Lee Chung-woo]

Apple Inc. will likely continue to be reliant on South Korean display manufacturers for supply, although competition will intensify in the chip industry with the U.S. tech giant introducing its own smartphone components, a report showed Tuesday.

According to a report released by the Institute of Information & Communications Technology Planning & Evaluation (IITP) on the impact of Apple’s internalization of parts on the chips and display industries, Apple is expanding the application of its own components such as chips and displays in its iPhones as part of a strategy to maintain its top position in the market.

Apple, which started off as a tech hardware manufacturer, led innovation in the software sector based on its own operating system (OS). It is also creating its own ecosystem in the chips sector by designing and developing exclusive mobile application processors and M series chips for MacBooks.

“Apple’s push for chip independence could make fabless companies like Intel Corp. and Qualcomm Inc. less competitive in the market but it may work in favor of foundries, including Taiwan Semiconductor Manufacturing Co. (TSMC),” the report said.

A majority of chip components used in iPhones have been designed and produced in the U.S. but the Inflation Reduction Act will create more room for Apple to seek local production, according to the report.

The report added that the legislation would force TSMC, the world’s No. 1 foundry company, to source some of the chips for Apple from U.S. production. About 26 percent of TSMC’s sales come from Apple.

The report added, however, that Apple will continue to source at least 60 percent of components from Korean display suppliers for the next few years.

Apple’s transition to micro-LED display technology away from the existing organic light emitting diode (OLED) for Apple Watch Ultra can be a new opportunity for Korean display makers.

“Apple will likely outsource display production to Korean suppliers to save the costs necessary for mass production,” the report said. “That could give Korean display makers an advantage to catch up with their Chinese rivals.”