A cloud hangs over the profitability of Gen 8 OLED. This is because Apple’s revenues from MacBooks are dropping, a key product that would use the OLED panels made by display panel maker’s Gen 8 OLED production lines.
The iPhone maker’s revenue from MacBooks was US$7.168 billion during its fiscal second quarter of 2023 running from January to March of this year, a drop of 31% from a year ago. In the fiscal first quarter of 2023 the revenue figure was US$7.735 billion, a drop of 29% year-on-year. For two straight quarters now, Apple is seeing its revenue from its MacBooks plunge.
This contrasts with the performance of its other two key products, iPhones and iPads, over the same time period. Revenue from iPhones during its fiscal second quarter of 2023 increased 2% year-on-year to US$51.334 billion, while it dropped 8% year-on-year in the prior quarter due to production problems by its contract manufacturer Foxconn in China. Similarly, revenue from iPads dropped 13% year-on-year for the fiscal second quarter of 2023 to US$6.67 billion but jumped 30% year-on-year for the fiscal first quarter of 2023 to US$9.396 billion.
Gen 8 OLED production lines, which will use larger substrates than Gen 6 OLED production lines, are being planned by Samsung Display and LG Display to supply OLED panels for IT products such as tablets and notebooks.
Apple will launch its first iPads with OLED panels next year and the South Korean display panel makers plan to use their existing Gen 6 OLED lines for this.
But for iPads and MacBooks after that, which will migrate with OLED panels, Samsung Display and LG Display have planned to build and use Gen 8 OLED production lines.
However, the two display panel makers are yet to place orders for key equipment needed to build a Gen 8 OLED production line, sources said. If they want to begin supplying OLED panels made from these new facilities, they will need to place orders for equipment soon considering display panel lines at least takes a year to complete.
This hesitancy from Samsung Display and LG Display to proceed with their spending plan on Gen 8 OLED is strongly likely to be about profitability.
It is yet undecided how much Apple will pay per OLED panel that it will use in MacBooks as there is no precedent. It is also unclear how many units Cupertino will buy.
Apple seeing revenues from MacBook sales drop is bad news for Samsung Display and LG Display in this circumstance. As the very reason Apple will want to change the panel from LCD to OLED in its MacBook to increase its sales price, the drop in overall revenue means the company will likely attempt to cut unit prices down when it buys them from the two South Korean display panel makers.
Another factor is the slow recovery of demand for IT products, which peaked during the two years of the pandemic but has now dropped to new lows from the global economic downturn.
Last month, Samsung Display said it plans to spend 4.1 trillion won building Gen 8 OLED lines up to 2026.
Japan’s Canon Tokki, the maker of deposition machines that will be used in Gen 8 OLED lines, is demanding Samsung Display pay not just the machine price but the development fee as well, sources said.
For LG Display, which is in the red, spending billions of dollars on Gen 8 OLED lines without guaranteed orders will be a difficult choice to make. Back in 2019, it completed its Gen 8 white-OLED line for TV panels in Guangzhou in 2019. But as there was no demand, the factory effectively sat still for a year.
The impact of Apple’s low revenues from MacBooks is also being felt by display production equipment suppliers to Samsung Display and LG Display.
Sources said the two display panel makers are notifying their suppliers that they cannot pay more for Gen 8 equipment than they did for Gen 6 equipment.