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iPhone supply chain bites back at Apple

LiveMint logoLiveMint 19-04-2017 Bloomberg

Apple Inc. is responsible for the health or mortal sickness of the cottage industry of companies that make parts for iPhones or assemble them. It turns out Apple can also be hurt by the interconnected supply chain.

On tap starting this fall will be a shift from two new versions of the iPhone to three. The two expected in Apple’s typical September launch window will be updated versions of the iPhone 7 and its larger-screen sibling, the iPhone 7 Plus.

The big deal for this year—the 10th anniversary of the iPhone—is a drastically different new phone with a more vibrant type of screen and extra real estate, thanks to slimmer frames around the edges. Wall Street has already grown excited that this reimagined iPhone will set off a rush of people splurging for a cool new iPhone with a big ticket price.

Oh, but wait. Literally.

The cool new iPhone may not be on sale in September because of hiccups in obtaining enough key components, Bloomberg News reported on Tuesday. The most visible is a different type of screen—known as organic light-emitting diode (OLED) display—which allows for a thinner, sharper-looking screens without hogging too much battery life. It gives Apple the technology it needs to make a phone that is essentially all screen.

Apple, at least initially, will be depending solely on the leading maker of OLED displays, Samsung Display Co. You know who already has a new smartphone with the same type of screen? That would be Samsung Electronics Ltd.

Yes. Samsung is one of Apple’s most important suppliers and one of its most bitter rivals. Much has been written about the peril of suppliers relying on Apple for their livelihood. Well, there’s also a risk to Apple from depending on its suppliers.

Samsung may not be doing this deliberately, but the smartphone-making part of Samsung apparently has a sufficient supply of OLED screens. Those parts are already rolling off factory assembly lines as the screens for Samsung’s new S8 line of smartphones which compete with the iPhone.

The enemy-and-friend relationship between Apple and Samsung has been evident for years. Apple worked hard to wean itself off Samsung computer chips for its iPhones and iPads. Apple sued Samsung for copying key elements of the iPhone even as Apple continued to buy parts from Samsung.

If the OLED iPhone model goes on sale in October or November, it won’t be a disaster for Apple. The company is no stranger to muddling through shortages of important iPhone components, and Apple CEO Tim Cook is a wizard of supply-chain management.

But the experience is a salient reminder that in the smartphone industry, no company is an island. Not even Apple.

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