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Apple seeks cheaper components for 'cheaper' iPhone

by on22 March 2018

You are not going to get what you pay for

Apple is seeking to push up the margins for its iPhone by getting cheaper components, according to Digitimes Research.

Digitimes said that  Apple plans to launch a new 5.85-inch OLED iPhone this year as an upgrade to the existing iPhone X, but the vendor has managed to reduce the new device's initial manufacturing bill of materials (MBOM) to a level much lower than that of its present level.

Digitimes Research senior analyst Luke Lin looked at Apple's upstream supply chain as indicating that the new device's MBOM will be more than 10 percent lower than that for iPhone X. He added that the MBOM of the iPhone X was more than $400 in 2017.

Apple has recently determined the direction for its next-generation iPhone lineup - which will consist of two OLED-based iPhones (5.85-inch and 6.45-inch) and a 6.1-inch LCD model. Thanks to the cost reduction, Apple may position the new 5.85-inch device as the cheapest model of all three next-generation iPhone models, Lin believes. One Apple project to develop a 5.85-inch LCD iPhone has been suspended since the end of the Lunar New Year holidays in mid-February and may be abandoned, Lin said.

Apple previously planned to release the LCD version instead of the OLED one in the 5.8-inch segment due to MBOM concerns. Apple's decision hinged on the cost of the OLED panels, Lin said.

When the iPhone X's suffered from weak demand, Apple pulled in a lot fewer OLED panels from Samsung Display than it had committed to. This gave Samsung more bargaining chips in their negotiation over the OLED panel quotes for the next-generation iPhones.

Apple managed to reach a better agreement with Samsung Display, which will mean that the panel costs will not increase.

Lin believes the 5.85-inch OLED iPhone may be the cheapest of the three new devices, as some of the smartphone's recent engineering samples have adopted components with lower-level specifications or lower capacities than those of the 6.1-inch LCD iPhone with LPDDR memory being one of the significant differences.


Last modified on 22 March 2018
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