Nearest the king nearest the gallows? Chinese enterprises trapped in the "fruit chain"

Once upon a time, being able to squeeze into apple supply chain meant the affirmation of product quality and technology for manufacturing companies, and it also meant that there would be a steady stream of orders in the future, but now the Chinese companies trapped in the "fruit chain" seem to be not living well. Whether it is OFILM or Lens Technology, these red people on the "fruit chain" in the past are not only no longer beautiful, but more importantly, they rely too much on "big customers" after frequent hidden dangers, once again vividly interpreting the five words of "accompanying the king like accompanying the tiger"...

Rumors that have rattled BOE advocates

According to South Korean electronic media The Elec, the number of OLED panels produced by BOE for iPhones has dropped sharply since February. The report analyzed that it may be that BOE adjusted the design of the OLED panel, such as expanding the width of the thin-film transistor circuit, which was stopped after Apple found it.

According to the report, it is the time when iPhone 13 component manufacturers are rushing to ship, but boe has seen a sharp decline in the output of iPhone OLED panels supplied to Apple since February, almost zero.

BOE began providing OLED panels for the 6.1-inch model of the iPhone 13 series last year. The initial reason for the early decline was a shortage of display driver ICs, but sources say that this alone does not explain the sharp decline in BOE production, possibly because BOE changed the design of OLED panels, such as expanding the circuit width of thin-film transistors, which may be a warning. Allegedly, Apple may have stated the problem to BOE, which should be resolved as soon as possible.

According to media reports, sources said that for Apple, BOE is unlikely to be excluded from the OLED panel supply chain, because this will help Apple to Samsung Display and LG Display to lower prices. In addition, despite the decline in production, BOE's B11 plant in Sichuan is still operating.

As soon as the news came out, it immediately caused a great response, but a careful reading of the news will find that the so-called conclusion of being kicked out of the "fruit chain" is nothing more than the result of the media speculating according to the manufacturer's production capacity, not the manufacturer's official statement. After attracting widespread attention, Apple has responded that it is unlikely to exclude BOE from OLED panel suppliers.

Behind this news that is more like a "misunderstanding", I am afraid that there is no open struggle in the AMOLED market.

AMOLED Market Dark War

The screen is a key link in Apple's industrial chain, from lcd to OLED material application, undoubtedly represents the development trend of the panel industry. In Apple's screen supply, South Korean company Samsung has always occupied an advantageous position. In recent years, with the rise of the domestic panel industry, BOE has begun to enter Apple's supply chain system.

After breaking into the fruit chain, BOE has become more and more active in Apple products, iPad, MacBook, Apple Watch and other products have flashed its figure, LCD, OLED screen and both.

However, what investors are most looking forward to is that BOE can enter the supply of Apple's highest sales and core business products - iPhone series smartphones as soon as possible. iPhones ship hundreds of millions of dollars a year, are known for quality control, and becoming its supplier not only means that the company can get a considerable number of orders, but also a golden proof that the product is recognized by the industry.

From the perspective of iPhone screen material applications, in 2017, the iPhone X used olED screens for the first time, and the subsequent iPhones used OLED screens except for the iPhone XR and the 11 series low-end models iPhone 11, all other series of models used OLED screens.

This is an important technology shift that accelerates the adoption of OLED technology. This also means that BOE is seeking OLED screens to be selected for iPhone supply.

But the supply relationship between BOE and the iPhone always gives the market the feeling of "seeing flowers in the fog". Just in November 2020, there was also news that BOE failed to pass the OLED panel test of Apple's iPhone 12 series. The news then reversed, according to Interface News, BOE began supplying Apple with the OLED screen panel of the iPhone 12 within December.

As for when BOE first entered the Apple mobile phone supply chain, it is difficult to find authoritative news to confirm. But multiple related messages suggest that, at least in 2021, BOE has supplied OLED panels for the iPhone.

While BOE actively seeks more share of the "fruit chain", Korean supply chain enterprises are also actively expanding. According to foreign media reports, from iPhone 12 to iPhone 13, the proportion of parts supplied by Korean manufacturers rose from 27% to 30%. In addition, this proportion is likely to continue to increase in the future.

It is reported that the latest iPhone uses Samsung Electronics and SK Hynix chips, Samsung Motor's camera lens and multilayer ceramic capacitors, LG Innotek's camera module, and Samsung monitor and LG display OLED panel. In addition, Samsung Displays and LG Display are expected to continue to provide most of the OLED panels for the iPhone 14, which is scheduled to launch in the second half of this year.

Since LG Electronics withdrew from the smartphone market, LG Group subsidiaries have become more and more closely cooperating with Apple, and Apple products have also begun to be sold in offline LG electronic stores. In addition, due to the increase in the supply of Apple, LG Innotek's sales reached a record high in the first quarter of this year, rising to 39.517 billion won.

Obviously, in order to get more market share and higher discourse power in the "fruit chain", all manufacturers have worked hard, but after entering the fruit chain, is it really so beautiful?

Chinese enterprises trapped in the "fruit chain"

Can enter the Apple supply chain is good, but for the "fruit chain" brand manufacturers to pay the price is also not small, whether it is profit margins or product quality, supply efficiency, etc., Apple will make meticulous and strict requirements for supply enterprises, for many enterprises, heavy cooperation with Apple, of course, can share the dividends of Apple's ecological growth, but once Apple kicked out of the industrial chain or Apple ecology has any strategic adjustment, for the "bet" on the "fruit chain" of the enterprise, it is difficult to bear the pain.

Luxshare Precision, Lens Technology and Goertek were once known as the "three giants of the fruit chain" in China. But now, due to the deep decline in stock prices, the "fruit chain three giants" have been jokingly called "fruit chain three fools". With the above-mentioned example of OFILM being kicked out of Apple's supply chain, the market has also had considerable doubts about the production and sales model of these companies that are highly dependent on Apple.

Since the beginning of the year, the stock prices of these companies have continued the downward trend since last year. From January 4 to April 25, the market value of Lens Technology shrank by about 59%, and the market value of Goertek shares shrank by about 51%.

A common feature of these companies is that their "first big customer" has a very high proportion of sales.

In the annual report released by Lens Technology on April 23, the name of the first major customer "Apple Inc." was rarely announced for the first time. In 2021, Lens Technology's sales to it were 30.098 billion yuan, accounting for 66.49% of the total sales. In the 2020 annual report of Lens Technology, the sales of the "first major customer" were 20.306 billion yuan, accounting for 54.97% of the total annual sales. Similarly, according to Goertek's 2021 annual report, the "first major customer" accounted for 42.49% of the company's total sales last year.

According to the relevant annual reports or performance forecasts, the revenue of the above companies last year was uneven. Luxun Precision's total operating income was 154.106 billion yuan, an increase of 66.60% year-on-year, and the net profit attributable to shareholders of listed companies was 7.072 billion yuan, down 2.12% year-on-year. Lens Technology's operating income was 45.268 billion yuan, up 22.55% year-on-year; The net profit attributable to the shareholders of the listed company was 2.070 billion yuan, down 57.72% year-on-year. Goertek's operating income was 78.221 billion yuan, an increase of 35.47% year-on-year; The net profit attributable to the shareholders of the listed company was 4.275 billion yuan, an increase of 50.09% year-on-year.

Similarly, on March 24 earlier, in response to the question of whether the company will be canceled by Apple like OFILM, Lens Technology also responded on the investor interaction platform: "The company's strategic and business cooperation with core customers continues to be carried out normally and orderly, and the R&D innovation cooperation continues to deepen and steadily improve." Investors are invited not to believe in rumors and not to spread rumors. ”

Despite the relatively high profit growth of Goertek shares, the market showed concern.

In the investor relations activity record table released by Goertek on April 8, some investors raised questions: "According to the company's annual report, the company's customer structure is relatively concentrated, and the sales of the top five customers account for 86.54%. Can the company's relationship with core customers (such as Apple) be maintained for a long time, and what work the company has done to stabilize core customers and what results have been achieved?"

In response, Goertek responded: "The company has achieved high recognition from core customers in design, manufacturing and other aspects, so as a strategic partner of major core customers, the company has a common advantageous share of key projects of major customers." The company will continue to actively invest in research and development, continuously improve production efficiency, meet the growing high standards and high requirements of customers, follow the rapid growth of customers, and continue to create value for customers to deeply bind with customers. ”

In fact, people's concerns about "fruit chain" enterprises are not unreasonable, before this the most representative is OFILM...

After being kicked out of the "fruit chain", he lost a huge loss of 2.6 billion yuan

In the early years, China's leading optical manufacturer OFILM is also Apple's supply chain, as a leading manufacturer of precision optoelectronic thin film components in China, OFILM holds many precision optoelectronic thin film components manufacturing patents, and has become a supplier of Apple lens modules.

After becoming a "fruit chain" enterprise, OFILM's revenue continued to grow, and the company's stock price also continued to rise, at the highest level of 26 yuan, the market value was once as high as 84.9 billion yuan, but now the company's market value has fallen below 20 billion yuan.

The reason why OFILM has such a big variable is because it was kicked out of the "fruit chain" in 2021, according to OFILM's announcement, the company received a notice from a specific overseas customer, and the specific customer plans to terminate the procurement relationship with the company and its subsidiaries.

On April 30, OFILM disclosed its 2021 annual report and the first quarter report of 2022, and the financial report showed that OFILM achieved operating income of 22.844 billion yuan in 2021, down 52.75% year-on-year; the net loss attributable to shareholders of listed companies was 2.625 billion yuan, and the loss expanded by 34.99% year-on-year.

In the first quarter of 2022, OFILM achieved operating income of 4.593 billion yuan, down 37.65% year-on-year; net loss attributable to shareholders of listed companies was 186 million yuan, compared with a net profit of 77.2011 million yuan in the same period of the previous year, down 341.33% year-on-year.

It can be seen from this that OFILM after being kicked out of the "fruit chain" has indeed been greatly affected.

For Chinese companies, breaking into apple supply chain is a double-edged sword, although becoming a "fruit chain" enterprise is a good thing, can greatly improve the company's revenue and profits, but over-dependence on Apple will also become the biggest weakness of enterprises. And ofo's experience has made many people sigh.

Written at the end: The Siege

As the world's most profitable technology company, Apple's market value has exceeded the world's sixth largest economy, and Apple is also related to the strength or decline of many supply chain companies, and even companies such as TSMC have a high dependence on Apple. Ten years ago, if any listed company was shortlisted as an Apple supplier, it would inevitably be written in the annual report. Even if it signs a confidentiality agreement with Apple, it will use the almost explicit words "international big customer" to show its identity.

But now, opening the annual report of the A-share "fruit chain" listed company, you will find that as far as possible to avoid mentioning the relationship with Apple, but repeatedly stated that it has expanded new large customers, and there is no excessive dependence on large customers.

At present, the situation of the "fruit chain" is more like a siege of the city, the people in the city want to go out, the people outside the city want to come in, and perhaps only time can give a way to break the situation.

Editor| Zhang Yi

Audit | Wu Xin