Analyst: Blame Samsung for iPhone 8’s high price tag

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iPhone 7
Switching to OLED won't be cheap.
Photo: Ste Smith/Cult of Mac

Apple’s upcoming premium iPhone is likely to be its most expensive model ever — and Samsung is partly to blame, according to a reliable Apple analyst.

In his latest research note, KGI Securities analyst Ming Chi-Kuo explains to investors that Samsung currently holds a practical monopoly on the supply of OLED displays. The company is likely charging Apple a huge amount of money to make the switch from LCD modules to OLED. Apple fans probably won’t be happy with the final price tag.

Apple previously paid between $45 and $55 for the screens on Plus-size iPhones. But Kuo claims Samsung is probably charging about $75 more for OLED displays. The final price for the displays likely costs Apple $120 to $130 per unit. That could explain why rumors predict the iPhone 8 (or iPhone Edition) will start out at $1,000.

The problem with OLED

Apple needs to find a secondary supplier for OLED screens. Locating one won’t be easy, because nobody can currently handle Apple’s production and quality needs.

The move to OLED screens is causing other headaches for Apple, too, Kuo told investors. Apple will likely scrap Touch ID from the new iPhone. The reason? No good solution exists for embedding it into the display.

“We believe 3D Touch module could be unfavorable for scan-through performance of under-display fingerprint recognition, which is one of the main reasons why OLED iPhone may abandon fingerprint recognition,” Kuo said, in the note obtained by AppleInsider.

Apple will unveil the iPhone 8 at an event at the Steve Jobs Theater in Cupertino, California, next week. New features are expected to include inductive charging, an edge-to-edge OLED display, facial scanning, 3D sensors, an A11 processor, improved cameras and much more.

  • CelestialTerrestrial

    It’s actually because Apple is a financially disciplined company that makes sure they are making consistent profitability. If you notice, out of all of the hardware makers, Apple CONSISTENTLY makes 20% Net Profits and they typically run the business at a Gross Profit margin in the 40% range. Most other smartphone mfg. don’t do that, because they couldn’t sell anything because they’d have to increase their MSRP by a good 20 to 25% and that would make their phones just as expensive as Apple.

    Now, why does Apple have to make that kind of profit margin?

    Many things that Apple has to do in order to create, maintain and support their eco system so they can attract and retain customers.

    Here’s some differentiation points.

    1. Apple builds and operates Apple Stores, none of these Android OEMs have a large number of retail stores built and being built around the world to sell, support and service their products, so customers have confidence that they are going to taken care of after the sale.

    2. Apple has to hire their own S/W and H/W engineers and since Apple’s mostly US based design, they have to pay premium wages to attract top talent. A company based in China doesn’t pay nearly as much money for their engineers.

    3. Android OEMs don’t develop their own OS, Development tools or applications like IWork, iLife type apps, etc. Apple provides those for free and it costs Apple money to create, support and update.

    4. Cloud Services. These Android OEMs don’t have Cloud Services, for the most part, if they do, it’s certainly not as robust. These Cloud Services requires large datacenters, which Apple’s constantly building new and larger to meet demand of the growing user base and needs of the user.

    5. Apple does have to offer other services that aren’t high margin to give the customer a full and complete eco system that includes App Stores, Music/Video/Books, etc.

    6. Apple wants to maintain a healthy financial status so they aren’t forced to lay people off and cut off parts of their eco system. They can also withstand a poor economic conditions much better having large amounts of cash reserves.

    7. While Apple does use Samsung and others to mfg. their components, Apple does design more aspects of their product than most others do. Samsung does a lot of their own design, with the exception of the OS, Development tools and the Office type apps. And Samsung simply operates on a lower margin to get the sales that they get, but they run at 11% to 13% Net Profit margin instead of 20% like Apple.

  • Daniel Skatter

    Am I the only one amused that we’re already picking who to blame for a device being more expensive…that HASN’T EVEN BEEN ANNOUNCED YET.
    Good gods…