China Targets Apple With Push Into Advanced Smartphone Screens
China Targets Apple With Push Into Advanced Smartphone
Screens
If BOE succeeds, it would not only prove its
manufacturing prowess but also score a win for China in its tech race against
South Korea and Japan
By Yoko Kubota Updated July 22, 2018 8:17 a.m. ET
CHENGDU, China—China’s campaign to become a global power
in advanced manufacturing is playing out at a high-tech factory in Sichuan
province, where engineers are aiming to supply display screens for Apple Inc.’s
AAPL top-tier iPhones.
BOE Technology Group Co. plants already make display
screens for Apple’s iPads and MacBook computers, and the company is also the
world’s top producer of large liquid crystal screens. Now it is seeking to
supply Apple with advanced organic light-emitting diode, or OLED, smartphone
screens, according to people familiar with the plans.
If it succeeds, BOE will not only prove its manufacturing
prowess with a technically challenging product, but also will score a big win
for China in its race to catch up to South Korea and Japan in advanced
display-screen manufacturing.
“Many years ago, people were saying that no, the China
guys can’t do it. But I think BOE makes a good example,” said David Hsieh,
senior director of display research at IHS Markit, a data-analytics company.
BOE, hardly a household name in the U.S., has advanced
quickly in the display industry. It became the No. 1 supplier of large LCD
screens last year, up from No. 5 in 2014, according to IHS Markit.
It is the only Chinese display company that supplies
Apple, which is notoriously finicky in its demands for top-quality components.
But LCD screens are easier to mass-produce than flexible
OLED displays, which involve applying tiny organic materials. Even Samsung
Electronics Co., an OLED pioneer and Apple’s primary display provider, has
struggled with a high rate of castoffs.
For Apple, landing BOE as an OLED display supplier
provides it with an alternative to Samsung, which Apple competes with in
smartphones but relies on for the OLED screens. Apple is keen to diversify its
suppliers to minimize production risks and ensure price competition, industry
analysts say.
Buying display screens from BOE, which is controlled by
the Beijing city government and whose biggest shareholders are state-linked
companies, could help Apple stay in China’s good graces—as long as BOE can meet
Apple’s high bar for quality.
“It would be seen favorably by Chinese policy makers if
Apple puts a stamp of good quality for China’s own technology of suppliers,”
said Dan Wang, a technology analyst at Gavekal Dragonomics.
Apple declined to comment.
China’s industrial policies are one of the factors
driving U.S.-China trade tensions, with the White House saying they give
Chinese companies unfair advantages.
BOE’s rapid rise is in part a reflection of those
policies, including government financial support for favored industries. But
BOE has also grown by tapping foreign talent and a growing pool of competent
local engineers.
At four out of five factories that BOE has recently built
or is currently building in China for the cutting-edge displays, local
governments contributed most of the initial phase of investment, company
filings showed.
IHS’s Mr. Hsieh said government backing helps, but BOE
also has talented and aggressive engineers, with a type of commitment he says
he has found increasingly difficult to find in the more mature industries of
South Korea, Taiwan and Japan.
A case in point is BOE’s approach to Apple.
BOE first knocked on Apple’s doors in about 2011 with
hopes of supplying the tech giant with screens, a person familiar with the
matter said. It has provided Apple with MacBook displays since 2015 and iPad
displays since 2016, the person said.
Apple has been not only a customer but also a teacher to
BOE, with its high quality expectations keeping BOE engineers working into late
hours. “To improve, one must play chess with the best player,” the person said.
This year, Apple for the first time included BOE on the
list of 200 top suppliers it has made public.
Apple began using OLED panels—which are brighter and
thinner than traditional panels—in its phones for the first time last year with
the release of the iPhone X.
The earliest BOE could supply the OLED screens would be
from 2020, one person familiar with the matter said. For iPhones intended for
release later this year, Apple is set to procure screens mainly from Samsung,
with a small portion coming from LG Display Co., people have said.
BOE already is supplying OLED screens to Huawei
Technologies Co. for the Chinese smartphone maker’s high-end Mate RS and
expects more shipments to several major clients later this year, said Zhang Yu,
BOE’s senior vice president, declining to name the clients. Huawei didn’t
respond to a request for comment.
Making OLED screens is hard: It involves handling tiny
compounds smaller than human hair and applying them in exactly the right spot,
or else colors appear distorted on the screen. Those compounds, which emit red,
blue and green colors on the panel, must be applied through a mask with holes
17 to 25 microns big, according to BOE engineer Cui Fuyi. That’s about
one-third the width of a human hair.
After months of trials, the current production yield at
Chengdu is around 70%, said Mr. Zhang. Industry experts say that is close to a
level where a steady mass production would be feasible.
—Yang Jie contributed to this article.
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