Tech

How the iPhone could help Samsung recover

The iPhone is key to Samsung’s recovery

Samsung is a company in the midst of a crisis. Its exploding Galaxy Note 7 continues to make headlines and has even been the butt of Barack Obama’s jokes. On Thursday, Samsung announced a 30 percent drop in operating profits for the last three months, and is predicting things won’t improve much for the holiday quarter. And, while it may still be No. 1, Samsung has also seen its share of the smartphone market decline in the face of huge competition from Chinese companies.

But Samsung has a plan — and that plan includes the iPhone.

While most of the headlines out Thursday have focused on Samsung’s terrible set of results, another development will have a much bigger impact on the company in the long term.

Samsung announced it was investing a record $24 billion (that’s $24,000,000,000) in its chip and OLED production facilities. Samsung may be best known as the maker of smartphones, but a huge slice of its business is making chips and displays for other companies, and this is clearly where it sees big growth in the future.

OLED (Organic Light-Emitting Diode) displays promise more power efficiency, more flexibility, thinner designs, more vivid colors, and deeper blacks than the LCD panels Apple currently uses.

The OLED display investment, which accounts for approximately $10 billion of the total investment, is of particular interest, given Apple is widely expected to release a smartphone using OLED display technology for the first time next year, on the 10th anniversary of the iPhone.

As well as featuring an all-new design and display technology, the new model of the iPhone is also expected to drive a huge upgrade cycle, similar to what the company experienced in 2014 when it launched the iPhone 6.

Morgan Stanley’s Katy Huberty calls this a “supercycle” while Cowen’s Timothy Arcuri says Apple is sitting on “a powder keg of a dramatically aging installed base” that will drive huge growth next year.

While all this is great for Apple, it could also prove a boon for Samsung, which is believed to have reached a deal with Apple to supply the bulk of the new displays. And when you consider that Apple is also likely to transition its iPad line to OLED displays in the near future too, the huge investment Samsung has announced this week doesn’t seem that crazy.

Cover: ASSOCIATED PRESS

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