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Apple’s OLED Panel RFP

A keen eye watches Apple eagerly to see what they are launching and when it will be released. Over the past several years, Apple has disrupted the chip marketplace by launching the Apple Silicon (M) chip in their laptops. I expect their cellular chips will eventually be brought in internally, which has also been a focus of the past few years. One of the reasons Apple has the best quality products is because they can control so much of the hardware experience, and of course, they own the software to take advantage of performance attributes.

Not many, however, look into the inner workings of Apple’s operations and how they get work done. Yes, they have employees with specific roles, duties, and responsibilities, but it goes beyond that to something vital: Vendor Partnerships. Without these Vendors that have received the seal of golden approval, Apple wouldn’t be able to deliver the outstanding products we love and use each day, and that’s exactly what we’re going to cover here.

In a recent article published on one of my favorite sites, MacRumors, Apple is evaluating its vendor relationships with Samsung, BOE, and Tianma to supply OLED panels using the same tactics their King of Procurement, Tony Blevins would execute. Because of the harsh stance Apple can take, companies typically lose money on the deal, yet they make that money back by working with other companies that want their services, thanks to the exposure Apple brings them. Let’s be honest: how many of you have heard of Tianma and that they’re now randomly a leader in OLED construction? But that’s the perk of working with Apple: you can be in the shadows and suddenly have a platform more significant than you could have ever imagined.

Samsung, however, has achieved the pinnacle of success they’ve dreamed of since inception, and with their final offer of $30 per OLED panel, they were not willing to drop their price to $25 to win the project. Instead, this will be negotiated between both BOE and Tianma, who not only will have to drop their prices to an unrealistic point but deliver an exceptional, nay, best-in-class quality product at the standard of Samsung and LG, which Apple has used for years. Risk for reward: they’d be foolish not to secure the deal, yet at the same time, they could end up just like Corning with their diamond glass, investing billions in infrastructure all to fail, get bailed out by Apple, meaning Apple now controls the company.

From the article, it appears that Tianma (again, who heard of them) has even qualified for Apple’s stringent quality requirements, which place BOE in the top position. Apple, however, is all about diversifying risk so that they will pick both. The question will be how squeezed Tianma will be financially.

The most exciting component is the Request for Proposals (“RFP”) on this initiative for the iPhone SE 6.1 in OLED. The questionnaire comprised over 500 questions covering leadership, financials and cash reserves, roadmap growth over the next 20 years, insurance coverages, quality standards (obviously), penalties if they don’t deliver, and sample contracts.

Once 20+ companies finished this RFP, the list was shuffled down to 5 and the final 3. Samsung is the clear winner, but with their position in the market, they don’t have to bend to Apple’s will anymore, perks of their booming TV sales, tablets, laptops, and relationships with other phone makers.

The most intriguing part is how Samsung, BOE, and Tianma had to fly into Cupertino to pitch their RFP responses to the procurement team, sharing every pain point, weakness, and flaw and upselling the promise of victory without error.

If you follow procurement opportunities, this is one way to monitor how they play out. My money is on a trifecta contract that Samsung spearheads as the overseer of the contract with both BOE and Tianma servicing Apple. Then, when either company feels pressure, Samsung will acquire them, owning more Intellectual Property (“IP)” rights, patents, and manufacturing plants.

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