Apple's iPhone 16 has seen lower-than-expected initial sales, deepening concerns for South Korean display manufacturers. According to recent reports from South Korean media, LG Display (LGD) is facing particularly severe challenges.
Citing industry sources, South Korean media DealSite reported that the iPhone 16 series' initial sales performance has fallen short of expectations, which is expected to impact South Korean OLED panel suppliers' performance in the second half of 2024.
The iPhone 16 debuted on September 20, in key markets such as South Korea, the US, and China. Although South Korea's three major telecom providers saw their pre-order stock sell out, a closer look revealed that demand for the iPhone 16 differs significantly from the iPhone 15.
South Korean media analysis suggests that while the initial supply of iPhone 16 sold out in South Korea, this was due to a lower supply in 2024 compared to 2023, leading to inventory shortages. This is seen as a temporary phenomenon, with similar situations reported in the US and China. Industry sources indicate that global pre-orders for the iPhone 16 have dropped by approximately 13% compared to the iPhone 15.
An analyst from SK Securities noted that IT demand was initially expected to rebound in the second half of 2024. However, this rebound might not occur until 2025, with sluggish demand in the US and China being the primary factors. The demand for iPhones appears to be affected by weaker consumer demand.
The iPhone 16 series includes the base model, iPhone 16 Plus, iPhone 16 Pro, and the flagship iPhone 16 Pro Max. Samsung Display (SDC) supplies OLED panels for the entire iPhone 16 series, while LGD provides OLED panels for the iPhone 16 Pro and iPhone 16 Pro Max models.
The iPhone 16 Pro and Pro Max feature 6.3-inch and 6.9-inch screens. Panel prices for the two aforementioned models are higher than the base model's 6.1-inch display.
On the surface, SDC seems more vulnerable to iPhone sales performance due to supplying panels for the entire series, approximately twice the supply volume of LGD. However, SDC is less affected since it supplies OLED panels to Samsung Electronics and several Chinese smartphone manufacturers. In contrast, LGD's reliance on Apple as a core client makes the company significantly more vulnerable.
LGD had high hopes for the iPhone 16 in 2024. In 2023, LGD faced delays in supplying panels for iPhones. However, LGD managed to resolve these supply issues in 2024.
Successful iPhone 16 sales were expected to boost LGD's performance. However, the much-anticipated "Apple Intelligence" on the iPhone 16 isn't fully baked and there is little hardware difference compared to the iPhone 15 series. This is disappointing news for LGD, which hoped to benefit from Apple's orders.
Initially, the South Korean securities industry and market predicted that LGD would return to profitability in the second half of 2024 with the launch of the iPhone 16. However, some are concerned that LGD's recovery might slow due to the underwhelming initial sales of the iPhone 16.
In the second quarter of 2024, SDC reported a revenue of KRW7.65 trillion (approx. US$5.734 billion) and an operating profit of KRW1 trillion. In contrast, LGD posted revenue of KRW6.7 trillion in the same period but suffered an operating loss of KRW93.7 billion, making LGD's return to profitability critical.
