(Bloomberg Opinion) – Apple Inc. looks as if it would spend just under $ 1 billion to keep its devices up to date.
Japan Display Inc., a major provider of displays, announced Friday morning that its rescue partner, Harvest Tech Investment Management Co., will provide up to $ 400 million in dollars a customer were promised.
According to a Bloomberg News release published at the end of June, this customer is Apple. Taiwan's TPK Holding Co., another longtime iPhone supplier, had talked about participating in a $ 1.1 billion rescue package for Japan Display, but withdrew. Therefore, the company had to look elsewhere, and Apple stepped in to close the gap.
This development occurred a week after Apple's main screen supplier, Samsung Electronics Co., had given a cryptic indication of a "one-time profit" in the display business "in the second quarter's preliminary income statement. The US company will pay up to $ 1 trillion ($ 850 million) to compensate for a shortfall in organic light-emitting diode (OLED) purchases, according to the South Korean Electronics Times and analysts at Citigroup Global Markets. (Apple had not responded to a request for comment until Friday's release.)
Interesting about both cases is that none of the payments are for direct purchase of components. They are designed solely to assist or compensate suppliers that Apple uses to make the most advanced screens available. Samsung is one of the companies that preceded Apple to integrate OLED displays in smartphones, and the iPhone maker is the only one to buy tens of millions. This is the responsibility of Samsung's display department.
It is likely that Apple has secured this offer by promising to buy a minimum amount, and it may have been undercut given the recent weakness of the iPhone's growth. At the same time, the US company desperately needs alternative sources to make sure it is not committed to any supplier. Here comes a rescue package for Japan displays into play. The Japanese company reported that the operating loss of 20.4 billion yen (188 million dollars) in the March quarter was higher than in the previous period "due to research and development costs for the preparation of OLED mass production".
] Japan Display being able to produce many OLED screens is great news for Apple – as long as it's not too late. Apple therefore has an incentive to keep the company alive.
With global smartphone brands losing their ability to improve their offerings, it's critical to maintain technology leadership for premium devices like the iPhone. In a downturn, Apple begins to figure out how much it costs to keep up with the times.
Contacting the author of this story: Tim Culpan at firstname.lastname@example.org
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Tim Culpan is a Bloomberg Opinion columnist who reports on technology. He previously worked for technology at Bloomberg News.
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