Image source @Visual China
Text | Capricorn Business Review
At the Apple 2022 Autumn New Product Launch Conference, Apple launched a new generation of iPhone 14 series, new AirPods Pro and three new Apple Watch, which once again ignited the enthusiasm of the global consumer electronics industry and hundreds of millions of "Apple fans".
The hot sales after each new iPhone will arouse the market's pursuit of domestic Apple suppliers, namely "fruit chain" companies, and this time will be no exception. The fact that OFILM was kicked out of also made the financial community pay great attention to the fate of Chinese technology companies in the Apple supply chain.
In fact, since OFILM was kicked out, Apple's supply chain has undergone tremendous changes, and the fate of Chinese technology companies has also experienced ups and downs and major changes in the pattern.
In June 2021, the official website of Apple announced the 2020 version of the supplier list. More than 200 suppliers come from all over the world. As of now, there is no latest supplier list updated. In the list of suppliers in
, compared with the 2019 list, there were 12 new companies in mainland China, which was the region with the largest number of new companies. At the same time, only 4 mainland companies were removed, and the total number of fruit chain companies reached 42. If 46 in Taiwan and 10 in Hong Kong were added, the number of Chinese companies in Apple's supply chain reached 98, accounting for 49% of the total number of suppliers, nearly half of which is a veritable "fruit chain" and ranks first among all countries in terms of quantity.
Apple has added 12 new suppliers in mainland China, including: Fuchigao, Nanping Aluminum, Gigao Innovation , Jiangsu Jingyan, Lingyi Intelligent Manufacturing (formerly Lingyi Technology), Derun Electronic , Changying Precision , Suzhou Shengli Precision, Shenzhen Xinlun Technology , Tianma Microelectronics , Guangzhou Zhongshan Metal Technology, Suzhou Xinjieshun Hardware and Electrical, etc.
As we all know, for a long time, the quantitative advantages and weights of China's "fruit chain" enterprises do not match. Before BOE was shortlisted as the core supplier of Apple's electronic screens, Chinese companies were almost nowhere to be seen in the supplier camp of core components among Apple's three core products: iPhone, iPad and MacBook. The reason why more Chinese mainland manufacturers are shortlisted for the "fruit chain" is mainly due to Apple's adoption of a multi-supplier "horse racing mechanism" for diversifying supply chain risks.
After conducting in-depth investigation and research on mainland "fruit chain" companies in "Capricorn Business Review", it was found that the situation of Chinese suppliers in "fruit chain" may change in the future, and several mainland Chinese manufacturers have followed BOE to squeeze into the edge of core components, and the advantages of later non-core component manufacturers continue to expand.
01 New electronic component supplier: Not afraid of horse racing, gradually getting closer to the core from the edge
Among many "fruit chain" companies, BOE is undoubtedly a role model and benchmark. After experiencing ups and downs, it finally set a precedent for mainland Chinese companies to set a core Apple component supplier in the 2020s.
BOE's first appearance on Apple's supplier list can be traced back to 2017. Since then, BOE has not missed the list and its relationship with Apple is stable, but it was not until 2020 that BOE began to supply OLED screen panels in small quantities for iPhone 12, and the news has not been confirmed yet.
At the beginning of this year, many industry insiders said that BOE became one of the suppliers of Apple’s iPhone 14 mobile phone screens. According to the latest news from analysis agency RUNTO Luotu Technology, the OLED panel produced by BOE passed Apple's certification in early July this year and will confirm the supply of iPhone 14, and it is expected to ship at least 5 million pieces this year. On August 30, industry insider Ross Young also revealed that there are three iPhone 14 series panel suppliers, namely , Samsung , BOE and LG, and BOE's supply share is about 6%. Earlier, Omdia, a well-known global market research agency, mentioned in its research report that in the iPhone 14 series launched in the third quarter, BOE, Samsung and LG are the three major suppliers of Apple's OLED screens, among which BOE's screen supply accounted for a new high, reaching 15%.
Of course, there are always questions about whether BOE can truly gain a foothold in the "fruit chain" and even challenge the dominance of screen supplier Samsung.
In May this year, a rumor about BOE being kicked out of the fruit chain caused a thousand storm. Korean media The Elec reported that after discovering that BOE arbitrarily changed the screen design (the circuit width of the thin film transistor) set by iPhone 13, Apple is considering canceling the order for up to 30 million iPhone 14 OLED screens to BOE. But after this report came out, BOE's internal staff denied the news, and Apple also clarified that it is unlikely to remove BOE's supply chain from OLED screens.
In other words, the iPhone 14 mobile phone purchased by Chinese consumers this year is likely to use BOE's screen. Following BOE's footsteps, more electronic component manufacturers have joined the fruit chain. Among the 12 new Chinese suppliers, the suppliers that provide Apple with electronic components include Zhaoyi Innovation, Tianma Microelectronics, Changying Precision and Derun Electronics.
Among them, Changying Precision supplies non-core electronic or metal components such as MacBook metal case, iPad external keyboard, Apple Watch structural components, etc., and Derun Electronics supplies precision electronic connectors to Apple.
The other two companies, Zhaoyi Innovation and Tianma Microelectronics, are more worthy of attention because they enter the fields of high-value components such as storage and screens, and have the potential to become Apple's core components suppliers.
First look at Zhaoyi Innovation. Zhaoyi Innovation Technology Group Co., Ltd. was established in 2005 and is currently the leading memory in China and is known as the "Chinese version of Samsung". Its main products are memory chips, microcontrollers, , sensor modules, etc., especially in NOR Flash, which is at the leading level in the world. In the early stages of development, Zhaoyi Innovation mainly focused on the NOR Flash market.
In 2010, Samsung announced its withdrawal from the low-profit NOR Flash market. In the following years, many mainstream international manufacturers announced the reduction of NOR Flash production, which instead provided development opportunities for Zhaoyi Innovation. Since then, the rise of "Huami OV" domestic mobile phone manufacturers has brought the innovation development of MY to a higher level, and ultimately helped the latter grow into a leading company in the domestic flash memory industry.
Relying on its technological advantages in advanced memory and IC solutions, Zhaoyi Innovation has successfully entered the Apple supply chain and replaced Huabang Electronics as the only NOR Flash supplier of Apple's product AirPods.
According to IC Insight data, the global NOR Flash market will show an oligopoly monopoly pattern in 2021, and most of the market share is occupied by three major manufacturers, Huabang Electronics, Wanghong Electronics, and Zhaoyi Innovation. Huabang Electronics and Wanghong Electronics are both from Taiwan, China. Among them, Zhaoyi Innovation has a market share of 23.2%, ranking third, but its sales growth rate is significantly higher than the top two.
This time, Gigabit's innovative NOR Flash products successfully entered Apple's supply chain, reflecting that its NOR Flash technology can already match industry leaders Huabang Electronics and Wanghong Electronics. Although Huabang Electronics lost its AirPods order, it is still the exclusive NOR Flash supplier of AirPods Max headphones. In addition, Wanghong Electronics is also one of Apple's suppliers, providing NOR Flash chips for its iPhone equipped with OLED displays.
Obviously, Zhaoyi Innovation’s selection of Apple’s core supplier this time is a typical case of Apple’s supplier’s “horse racing mechanism”, and it can be called a “dark horse”.
However, in the global memory chip market, NOR Flash accounts for a small proportion. The world's mainstream memory chips mainly include three types: memory chip DRAM, flash chips, NAND Flash and NOR Flash. According to IC Insights data, in 2021, the global NOR Flash chip market size will only account for 2% of the global memory chip output value, while the output value of DRAM and NAND Flash can reach 56% and 41%.
In the iPhone supply chain, DRAM and NAND Flash are both core components, mainly supplied by three companies: Samsung, SK Hynix and Toshiba Kaixia. Although Zhaoyi Innovation also has product coverage in these two fields, it started late and is currently difficult to enter the core supplier of Apple's memory chips.
Look at Tianma Microelectronics again.
Tianma Microelectronics entered 200 core suppliers of Apple this time, and is the second mainland panel factory to join Fruit Chain in addition to BOE.
Tianma Microelectronics Co., Ltd. was established in 1983 and was listed on Shenzhen Stock Exchange in 1995. It is an innovative technology enterprise that provides comprehensive customized display solutions and fast service support worldwide.
In terms of display technology, Tianma Microelectronics has mastered technologies such as LTPS-TFT, AMOLED, flexible display, Oxide-TFT, 3D display, transparent display, and IN-CELL/ON-CELL integrated touch control.
According to public information, Tianma Microelectronics has become Apple's OLED supplier, but has not disclosed which products provide OLED displays for Apple. Tianma Microelectronics' screens have always been used by domestic mobile phone manufacturers in mid- and low-end products, such as Redmi, OPPO Reno series, etc.
Therefore, Apple is likely to not apply Tianma's screen to core products such as iPhone and iPad, but it is possible to use Tianma Microelectronics' display solution on non-mobile phone products such as smart wearable devices Apple Watch or computer iMac.
Tianma Microelectronics is mainly engaged in LTPS-LCD display technology, and currently LTPS-LCD panels are being quickly replaced by AMOLED panels. To this end, Tianma Microelectronics has prepared for the future and began to make efforts in the broader AMOLED market early, and built my country's first OLED pilot line in 2010.
Today, Tianma Microelectronics has built a number of OLED rigid and flexible production lines. The 6th generation flexible AMOLED production line project ( Xiamen ) with a total investment of 48 billion yuan and a total construction area of about 1.26 million square meters was started in May last year. It is currently the largest flexible AMOLED single-piece factory in China. After completion, it will help the company's production capacity scale to rank among the top three in the world, which lays a solid foundation for it to become Apple's OLED supplier.
However, there are many star companies from Japan and South Korea in the Apple OLED supplier lineup, including Sharp, Sony, Samsung, LG and BOE. Compared with them, Tianma Microelectronics is obviously weaker in competitiveness. The addition of Tianma Microelectronics to fruit chain is more likely to be due to the "horse racing mechanism" of Apple suppliers. In the early stages of cooperation, Tianma Microelectronics is more likely to supply some display screens for Apple with non-core electronic products.
However, although it is difficult for Tianma Microelectronics to enter the core OLED supply chain of Apple's core electronic products, in the fields of the new generation of display technologies MiniLED and MicroLED , Tianma Microelectronics may achieve "overtaking on the curve".
This is because MiniLED and MicroLED are display technologies based on LCD evolution, and LCD is the field that Tianma Microelectronics is good at. Many Japanese and Korean companies withdrew from the LCD market early, giving Chinese companies the opportunity to compete with Japan and South Korea in the fields of MiniLED and MicroLED.
direct display MiniLED is one of the display technologies that Apple values very much. Apple plans to apply MiniLED technology to iMac, Macbook and iPad. For example, in April 2021, Apple's new generation of iPad Pro adopted Mini LED backlight technology for the first time. Tianma Microelectronics previously stated that it is preparing for mass production of MiniLED.
In addition, Apple is accelerating the development of the new generation of display technology MicroLED, investing US$330 million to LED manufacturer Jingyuan Optoelectronics and LCD panel manufacturer AUO Optoelectronics build a factory in Taiwan, China to produce future MicroLED displays for iPhone, iPad, MacBook and other devices. In order to seize the development opportunities of the new generation of display technology and break the monopoly of Japanese and Korean companies in the electronic display market for many years, Tianma Microelectronics ( Shenzhen Tianma A) issued an announcement in June this year stating that it plans to invest and establish a joint venture project company in Xiamen with its affiliated companies Tianma Display Technology, Guoma Industry, Torch Investment and Xiangtou Group, with a total investment of 1.1 billion yuan to build a full-process MicroLED test line that has been transferred from a huge amount to a display module.
02 Non-core parts supplier: The back wave is fierce, and the industry's advantages continue to expand
Although only BOE's Chinese supplier has entered Apple's key core parts manufacturer camp, but in PCB circuit boards, antennas, FPC flexible printed circuit boards, speakers, touch motors, glass covers and back covers, metal structural parts, precision connectors, functional materials and other non-core parts, Apple still finds it difficult to find a perfect replacement supplier outside the Chinese market, or it can only select a replacement among Chinese companies. Because these components only have a complete supply chain system in the Chinese market, no other country or region can compare with it.
my country's advantages in the field of non-core parts supply chain of 3C products are mainly reflected in not only covering a wide range of categories, but also having multiple manufacturers in each category, providing high quality and low price, and production speed is also very fast.
Apple also chose to maintain long-term cooperative relationships with many mainland Chinese suppliers in this field because it attracted the competitive advantages of Chinese companies in the non-core parts supply chain and the cost-effectiveness of products. This can be seen from the industry situation of Apple's newly added mainland Chinese suppliers in 2020.
In fact, except for the four electronic component suppliers mentioned above, the remaining newly added suppliers are all supplying non-core metal parts or material components.
Specifically, Nanping Aluminum supplies aluminum parts, such as aluminum alloy backing for mobile phones and tablets; Shengli Precision supplies metal structural components; Zhongshan Metal supplies metal profiles; Xinjieshun supplies hardware parts.
It is worth noting that among these newly added metal parts suppliers, there are Jingyan Technology and Fuchigao, which specializes in metal powder injection molding technology (MIM for short).
MIM technology, that is, metal powder injection molding technology, is a new type of powder metallurgy near-net formation technology formed by introducing modern plastic injection molding technology into the field of powder metallurgy. MIM technology allows complex small metal originals to be produced like plastic products and are widely invested in medical, military, electrical appliances, machinery and other fields. In the field of smartphones, MIM technology has been used in smartphone camera brackets, connectors, charging connectors, folding screen shafts, special-shaped structural parts and other components.
Jiangsu Jingyan Technology Co., Ltd. was established in 2004 and is a professional manufacturer and solution provider of metal powder injection molding (MIM) products. The company was first listed on the Shenzhen Stock Exchange in 2017 and is also the first MIM listed company in A shares .
Jingyan Technology mainly sells parts and products in the popular consumer electronics and automotive fields in the market, focusing on customized MIM core components. According to the company's financial data, Jingyan Technology's operating income soared from 95 million yuan in 2013 to 2.404 billion yuan in 2021, with the corresponding CAGR exceeding 50%.
Jingyan Technology is currently the only full MIM product manufacturer in China, and has developed more than a thousand MIM components. The strong R&D strength and full product coverage have brought Jingyan Technology to Apple's attention, and has obtained multiple Apple supply chain projects including mobile phone camera brackets, connector interfaces and wearable device structural parts, thus entering the fruit chain. At present, Jingyan Technology's Apple business operating income accounts for more than 40% of its total revenue.
Apple has always attached great importance to MIM technology and has widely used this technology in the production and manufacturing process of various electronic products under its jurisdiction. There is a story about Apple's exposure to MIM: When Apple was developing the iPhone 4, Jobs wanted to make it the thinnest smartphone in the world at that time, but the space inside the iPhone 4 was quite limited, and the internal parts design was more complicated than before. Jobs' perfectionism makes the manufacturing of internal parts of the iPhone 4 unprecedentedly difficult. Under the insistence of Jobs, under the face of multiple constraints, traditional molding processes such as casting and forging CNC processing cannot meet the needs at all. MIM began to show its strengths and allowed Apple to catch a life-saving straw, and began to be used in the manufacturing of iPhone mobile phone parts, and has been reused by Apple to this day.
In addition, more and more consumer electronics manufacturers have begun to produce their own brand of folding screen mobile phones, and folding screen mobile phones have broadened the stage for MIM display. The most important metal component of the folding mobile phone is precision hinges. In terms of precision hinges production, the MIM process is more important - the MIM process currently accounts for 40% to 60% of the overall production cost of hinges, and some models account for a higher proportion. In the field of MIM parts production and processing of folding screen mobile phones, Jingyan Technology has long made arrangements, and its biggest customer in folding screen business is Samsung. If Apple wants to produce foldable screen phones, it may choose MIM parts processors from its core suppliers, and Jingyan Technology will be the first choice.
Of course, according to Apple's horse racing supplier management strategy, considering that Jingyan Technology's current MIM field has ranked first in the industry in terms of shipments, in order to maintain control, Apple will naturally not let it dominate. This can also explain why Apple also pulled Fuchigao, the second largest in the industry, into suppliers, mainly to balance Jingyan Technology's supply share.
Look at the new round of new materials.
Any electronic product cannot be separated from tape and film to adhere to internal components such as screens and batteries. The higher the electronic product, the higher the requirements for tape and film . The electronic products and materials field has always been monopolized by international giants such as 3M. Only a few Chinese companies can break the monopoly of these giants in some sub-sectors, and new rounds of new materials are representative of them.
Although Xinlun New Materials is the only mainland Chinese company that supplies functional tapes in the fruit chain, it was selected as the core supplier of Apple for the first time, according to the company's announcement on March 13, 2015, Xinlun New Materials began to supply electronic film materials to Apple's iWatch as early as 2015.
Xinlun New Materials Co., Ltd. was founded in 2002 and is headquartered in Nanshan District, Shenzhen. It was listed on the Shenzhen Stock Exchange in 2010. At present, Xinlun New Materials' new material business is mainly concentrated in new energy materials, electronic functional materials and photoelectric display materials. Among them, in the electronic functional materials sector, Xinlun New Materials' main products are various adhesive products used in the consumer electronics field.
According to Xinlun New Materials' 2021 financial report, in the field of electronic functional materials, the company is an important supplier of mobile phone functional tapes for Apple in China. More than 100 products have entered its BOM procurement list, and the terminals used include Apple mobile phones, computers, watches, headphones and other products.
Strangely, although Xinlun New Materials supplied Apple with functional tape and other products early, it did not really appear on the Apple supplier list until 2020. This may be because in the future, Apple will not only cooperate with Xinlun New Materials on low-end electronic film materials such as functional tape, but will also consider purchasing Xinlun New Materials other mid-to-high-end optoelectronic material products, such as OCA.
As one of the important raw materials for touch screens for electronic products, OCA optical glue is mainly used for material bonding of touch screens. With the popularization of new applications such as consumer electronics, automotive electronics, and smart homes, the market demand for touch screen devices has expanded rapidly in recent years, especially the flexible display industry as a new growth driver, which has promoted the development of the OCA optical glue industry. OCA optical glue manufacturers are mainly concentrated in the United States, Japan, South Korea and other countries. Japanese, Korean and American companies have long mastered the core technology of OCA optical glue, and their market share is more than 80%. However, in order to avoid the choke of key materials, my country's independent research and development of OCA optical glue has accelerated, and is gradually replacing imported products in some application fields. Xinlun New Materials is one of the representative companies.
According to Xinlun New Materials, as the flagship product of Xinlun New Materials optoelectronic materials, OCA has achieved major breakthroughs in the field of display fitting applications. For example, in 2021, the folding hardened protective film + folding OCA independently developed and produced by Xinlun New Materials successfully mass-produced on the first folding screen mobile phone Find-N of OPPO, achieving a major breakthrough in domestic folding OCA and won the "OPPO 2021 Best Innovation Award".
Perhaps it was because Apple saw the potential of Xinlun New Materials in the high-end OCA field that it brought it into the ranks of suppliers.Currently in the field of high-end OCA, Xinlun New Materials' core technology is still behind Japanese, Korean and American companies such as 3M, Mitsubishi MPI, and LG Chemistry. But in addition to core technologies, supply chain stability and rapid response capabilities are also important factors for Apple to consider when choosing suppliers. In these two aspects, Xinlun New Materials is obviously very advantageous. Therefore, in the future, Apple may consider supporting Xinlun New Materials as one of the high-end OCA suppliers that replace Japanese, Korean and American companies.
03 Conclusion
Tianfeng Securities Analyst Kuo Mingchi pointed out that in recent years, in order to diversify supply chain risks, Apple has not wanted to rely on specific component suppliers, but actively adopts a multi-supplier strategy, such as panels, memory chips, etc., which are all supplied by multiple suppliers. In this way, not only can supply chain risks be diversified, but suppliers can also compete and restrain each other, which is conducive to reducing costs.
Apple is trying not to let any suppliers grow big enough to threaten Apple's control over this component, and also leaves most non-core components suppliers without the right to speak. In contrast, these non-core components suppliers, such as those fruit chain companies that rely on Apple's revenue, which are highly substitutable for parts that are supplied by Apple, and are doing their best to serve Apple, not only should they worry about being gradually compressed because of their lack of bargaining power, but also should be replaced by suppliers who provide higher cost-effectiveness and thus kicked out of the fruit chain.
Therefore, in order not to be squeezed out of the fruit chain and maintain competitiveness, Chinese suppliers are active and set up factories in countries such as India and Vietnam. Under Apple's instructions and even requests, fruit chain companies crossed the sea and set up camps in India and Vietnam. For example, Luxshare Precision and Goertek have successively invested in and built factories in Vietnam. Luxshare Precision's subsidiary in Vietnam mainly produces AirPods Pro smart wearable devices, and according to official statements, nearly one-third of Luxshare Precision's production capacity will be carried by the Vietnamese factory in the future.
In addition, many fruit chain companies have chosen to transform into new businesses and have entered the fields of AR/VR, new energy vehicles, etc. in order to reduce their dependence on Apple. For example, as one of Apple's major OEM factories, Goertek Co., Ltd. officially entered the VR/AR field after taking over the exclusive OEM of Oculus headset under Meta in 2020, and has occupied 80% of the global mid-to-high-end VR headset market in 2021. Luxshare Precision, the "Fruit Chain No. 1" that won the iPhone 14 assembly order this year, plans to jointly form a joint venture company and make great strides into the new energy vehicle supply chain industry. Lens Technology , a supplier of Apple glass cover, has entered the photovoltaic and the automotive field, and has established long-term cooperation with car companies such as Tesla , Bentley, Porsche , Mercedes-Benz , and NIO to supply products such as in-car central control screens.
