Samsung Benefits From The New iPhone In More Ways Than One

by Trefis Team
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Apple (NASDAQ:AAPL) is set to unveil its much-anticipated tenth anniversary iPhone (likely called iPhone 8) on Tuesday. While the new device is expected to set off another big upgrade cycle for Apple, Samsung Electronics (OTC:SSNLF) – the world’s largest smartphone component manufacturer and handset vendor – could also benefit significantly from the refresh of the iconic device. In this note, we take a look at a couple of reasons for the same.

We have a $1,900 price estimate for Samsung Electronics, which is slightly below the current market price.

See our complete analysis for Samsung

Tailwinds For Samsung’s Components Business 

The iPhone 8 is reported to sport OLED displays, unlike previous iPhones which featured LCD screens. Samsung, being the world’s largest OLED supplier (with over 90% market share), is expected to be a big beneficiary of this shift. The company is reportedly the sole OLED supplier to Apple and its price realizations are also expected to be higher than usual. Per KGI Securities, Samsung is likely to be charging Apple $120 to $130 per OLED module, which is about $75 more than the 5.5-inch LCD modules on the iPhone Plus models. While Apple is reportedly working on diversifying its OLED sourcing by investing in LG’s OLED operations, it could be at least 2019 before the company sees volumes ramp up, potentially giving Samsung close to two years of exclusivity. Separately, Samsung could also benefit from stronger demand for its memory products, as Apple is also expected to boost DRAM and NAND capacity for the new device.

Apple Could Help Popularize Features Samsung Has Had For Years

The new iPhone is expected to sport new features such as edge-to-edge OLED displays and wireless charging. While Samsung has been offering these features for a few years now on its Galaxy S devices, the launch of the new iPhone could help to popularize these features with mainstream customers. The supply of the new iPhone could be limited through the crucial holiday period, on account of a more complex manufacturing process compared to previous versions of the device, which has resulted in some manufacturing yield issues for Apple. While Apple is also expected to launch an upgraded version of its iPhone 7 (with potentially better availability), customers seeking a more contemporary looking handset could veer towards Samsung’s S8 and the new Galaxy Note 8, which would offer a form factor that is similar to the iPhone 8 at a lower price. The new iPhone is expected to start at $1,000 compared to ~$700 for the Galaxy S8.

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