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Industry-wide shortage of DRAM chips may impact production of 2017 iPhones

Christian Zibreg ∙ July 6, 2017

A major malfunction at one of its manufacturing facilities in Taiwan has caused DRAM chip provider Micron Technology to scrap half of the wafers produced at the plant, trade publication DigiTimes said Thursday. About 60,000 units of twelve-inch wafers have been scrapped.

The problems with nitrogen gas have caused production lines at the fab to stop temporarily, said a report from Taiwan's TechNews, without citing its source.

Research firm TrendForce said that a nitrogen gas dispensing system malfunction had led to the contamination of wafers and equipment in Micron's plant near central Taiwan.

The facility in question is known to have produced LPDDR4 RAM for iPhone devices in the past.

”The temporary shutdown of Fab-2 could have an impact on shipments of the upcoming new iPhone devices as well,” added the research firm.

TrendForce analysts base their reports on channel checks in the supply chain.

“Regarding recent rumors about Micron's fabrication facility in Taoyuan, Taiwan, Micron hereby clarifies that there was no nitrogen leaking incident nor evacuating of personnel,” Micron said in a statement to Reuters.

“There was indeed a minor facility event but operations are recovering speedily without material impact to the business.”

According to DRAMeXchange in June, the average selling price of these chips will rise five percent sequentially in the third quarter of this year as supply remains tight. The rise in DRAM prices could also be seasonal due to the expected ramp up in iPhone production during the summer ahead of new models coming in the fall.

DRAMeXchange is a division of TrendForce.

It's unclear if the incident at the Micron plant will impact Apple's launch volume targets for the OLED-based iPhone 8 and the iterative LCD-based iPhone 7s and iPhone 7s Plus smartphones.

The Cupertino company typically diversifies its suppliers in order to minimize risk.

For what it's worth, Apple has also experienced a shortage of 3D NAND flash chips for 2017 iPhones due to lower-than-expected yield rates for SK Hynix and Toshiba's 3D NAND technologies, forcing the Cupertino giant to turn to Samsung as a supplier.

iPhone 7 X-ray image courtesy of iFixit

Shortages of 3D NAND flash chips for 2017 iPhones forcing Apple to turn to Samsung, again

Christian Zibreg ∙ July 6, 2017

Apple's upcoming iPhone models—the OLED-based iPhone 8 and the iterative LCD-based iPhone 7s and iPhone 7s Plus handsets—have been hit in a global shortage of 3D NAND flash chips, forcing the Cupertino giant to call on Samsung in an effort to secure more.

According to a new report Thursday from DigiTimes, the overall supply of 3D NAND flash components for 2017 iPhones has fallen short of Apple's orders by as much as thirty percent.

That's because the company's current flash chip suppliers SK Hynix and Toshiba have both experienced lower-than-expected yield rates for their 3D NAND technologies.

SK Hynix is among the bidders for Toshiba’s lucrative flash chip unit.

Here's an excerpt from the DigiTimes report:

Apple has turned to Samsung for more NAND chip supplies for its upcoming phones, since Samsung has relatively stable yield rates for 3D NAND technology and has scaled up its output of 3D NAND chips.

TrendForce estimated that supplies of the 3D NAND flash storage chip won't ease until the middle of 2018. “The NAND Flash industry’s manufacturers will continue to devote their attention to the development of 3D 64L NAND Flash technology in 2017,” said TrendForce.

In the second half of 2018, some suppliers will also begin to shift their attention towards the industry’s newer and more advanced 96L flash storage products. Samsung, Toshiba and Micron Technology are currently transitioning to 64-layer 3D NAND flash products, while SK Hynix plans to jump straight to supplying 72-layer 3D chips.

“These gradual changes are all expected to have a potentially beneficial effect on the productions of NAND Flash in 2018,” added TrendForce. “As a result, their prices could start to fall as early as next year”. However, the global supply of NAND flash chips is set to remain tight through the end of 2017.

Business Korea said that Samsung Electronics (which leads the global NAND flash market), Toshiba, Western Digital and SK Hynix are accelerating the development of these three-dimensional NAND flash chip technologies, which basically stack more memory cells than 2D chips while utilizing existing mass production facilities.

The 128GB iPhone 7 model, for example, uses Toshiba’s 3D BiCS NAND technology, which stores three bits of data per transistor and stacks 48 NAND layers onto a single die, bringing accelerated read and write performance compared to 2D flash memory chips.

DigiTimes: Microsoft Surface device orders much lower than original expectations

Christian Zibreg ∙ July 5, 2017

Orders for Microsoft's Surface devices, including the latest models, have been much smaller than the original expectations of Pegatron, the contract manufacturer which assembles them.

According to sources from the upstream supply chain cited in a DigiTimes report Tuesday, Pegatron Technology has seen weakening orders from clients recently.

Here's an excerpt from the report:

Since demand for Microsoft's Surface products has been seriously undermined by other first-tier vendors' similar devices, the software giant has been conservative about placing its orders, which have been much lower than than Pegatron's original expectations.

Pegatron also assembles iPhones alongside Apple's longtime manufacturer Foxconn.

The Windows giant unveiled a fifth-generation Surface Pro tablet on March 27 alongside a new Modern Keyboard with a built-in fingerprint reader and other accessories. Among other features, the device has 13.5 hours of battery life, Intel’s seventh-generation Core processor code-named “Kaby Lake”, a new Alcantara keyboard, a next-generation Surface Pen and more.

The same Intel chip also powers, Microsoft’s $999 MacBook rival, dubbed Surface Laptop.

https://www.youtube.com/watch?v=tlZJw-zk0bU

Speaking of which, DigiTimes says that Surface Laptop orders are unlikely to boost Pegatron's revenues until later in the third quarter of 2017. Pegatron Vice Chairman Jason Cheng expects revenues in the second half of 2017 to at least stay flat year on year.

Microsoft is reportedly set to lay off thousands of sales staff around the world in the latest round of restructuring, TechCrunch said a few days ago. Bloomberg added that the redundancies would be “some of the most significant in the sales force in years.”

Analyst says iPhone 8’s 3D sensing module is ready for mass production

Christian Zibreg ∙ July 5, 2017

iPhone 8 is expected to use a laser transmitter and receiver for advanced facial recognition, 3D mapping, augmented reality and other features. A Barrons report, citing analyst Jun Zhang with Rosenblatt Securities, suggests iPhone 8's 3D sensing module is ready for mass production.

The analyst believes that a company called Viavi Solutions will build 150 million optical filter units for Apple in 2018. He said 3D sensing could be used for facial recognition on iPhone 8, potentially supporting simple gesture recognition in the front.

Furthermore, a 3D sensor for the rear camera should improve depth-of-field photography.

As we previously reported, other suppliers of 3D-sensing modules for iPhone 8 are said to include Largan, Lumentum and Finisar. In the analyst's view, the adoption curve could ramp once the cost of 3D-sensing modules lowers to $10 per piece.

Viavi is one of the 3D-sensing market leaders.

iPhone 8 mockup via iDropNews.

Apple could make major upfront investment into LG’s OLED production lines

Christian Zibreg ∙ July 3, 2017

Apple is reportedly in talks with LG Display about investing anywhere between $1.75 billion and $2.62 billion into the South Korean firm's new “E6” plant with a target monthly capacity of about 30,000 units of sixth-generation OLED panels.

According to The Korea Herald newspaper on Monday, the upcoming facility would be “exclusively dedicated to Apple orders” and should come online as early as 2019. A source said that the funding from Apple should help LG Display reduce risks from the lower margin.

The two companies have tentatively agreed on the investment plans, but details on the timing and size of the investment have yet to be finalized. The final decision is expected to be made following LG Display's board meeting later this month.

LG previously discussed an $870 million Google investment into its OLED plant.

An anonymous source said:

Samsung Display is the only display maker that meets Apple’s strict quality criteria for now. LG Display is said to be meeting about 70 percent level of the requirements, while Chinese display makers are still struggling to catch up with that of LG.

LG Display’s OLED supply for iPhone was delayed because the company failed to purchase Canon Tokki’s vacuum machine, the most advanced OLED production equipment whose supply is extremely limited. Recently, LG secured two units of the machine to speed up production.

With the new equipment installations expected in December 2017 and February 2018, LG Display’s production capacity is expected to double to 60,000 OLED panel units per month.

LG’s other new OLED plant, called “E5”, will focus on orders from LG Electronics and Chinese clients. Samsung Display is expected to be the sole supplier of OLED panels for iPhone 8 this year. LG Display currently builds flexible OLED panels for Apple Watch on an exclusive basis.

Samsung Display is reportedly building the world's biggest OLED manufacturing facility dedicated to orders from Apple and Samsung Electronics.

iPhone 8 concept via Benjamin Geskin.

Another supplier breaks silence: iPhone 8 could be unveiled in September and ship in October

Christian Zibreg ∙ June 16, 2017

Finisar, one of the the world's largest suppliers of optical communication products, told investors on an earnings call that it expects one company, without mentioning Apple by name, to account for millions of units of a specialized laser for depth-mapping.

Finisar is not on Apple's official list of suppliers.

Loup Ventures believes Apple is that unnamed customer. Based on Finisar's comment, Loup expects the next iPhone to be announced in September and ship in October, Axios reported.

Known as VCSEL, which is an acronym for “vertical-cavity surface-emitting laser”, Finisar's specialized sensor is basically a semiconductor-based laser diode that emits a highly efficient optical beam vertically from its top surface.

Lumentum, another supplier, said in May it would kick off volume shipments of the same type of laser in the second half of the year. Aside from Lumentum and Finisar, 3D sensors for the OLED-based iPhone 8 models should also be built by Himax Technologies, Barrons learned.

iPhone 8's highly anticipated 3D and AR features may be based on an advanced motion and depth-sensing technology from Israeli startup PrimeSense, which was acquired by the Cupertino firm in November 2013 for a reported $345 million.

KGI Securities analyst Ming-Chi Kuo predicted in February that iPhone 8 would ship with an enhanced camera outfitted with laser sensors to support capabilities like 3D selfies, accurate depth mapping, 3D modeling, advanced biometrics and augmented reality features.

iPhone 8 will supplement its FaceTime camera's standard RGB CMOS sensor with a pair of infrared transmitting/receiving modules and a custom 1.4-megapixel sensor capable of detecting changes in light signals, allowing it to sense depth, as per KGI.

At its Worldwide Developers Conference last week, Apple unveiled ARKit, a new framework for developers to help them bring augmented reality experiences to their iPhone and iPad apps.

Augmented reality applications typically display real-world images underneath a computer-generated layer of information, thus augmenting the real world.

iPhone 7 Plus dual-lens supplier Largan Precision publicly confirmed a few days ago that it would start shipping lenses for a 3D-sensing module to be “used in a smartphone ready to ship in the second half this year”.

Image: Alasdair Coull, head of Peter Jackson's Wingnut AR, shows a demo at WWDC 2017 of an upcoming augmented reality game built on Apple's new ARKit framework.

Apple supplier Largan to ship 3D lenses soon, likely for iPhone 8

Christian Zibreg ∙ June 14, 2017

Taiwanese vendor Largan Precision, which supplies lenses for the dual-camera iPhone 7 Plus, recently confirmed it would start shipping facial recognition 3D sensors in the second half of this year, in time for iPhone 8.

The company is currently in the process of expanding production capacities. They'll be hiring a cool 4,500 workers for its new production facility, or nearly double its current workforce. Apple's OLED-based iPhone 8 is said to use 3D sensors to capture a user's face and iris, even in low-light conditions.

KGI Securities analyst Ming-Chi Kuo predicted that a next-generation FaceTime camera on iPhone 8 would augment standard RGB sensors with infrared transmitting/receiving modules and include a bespoke 1.4-megapixel sensor capable of detecting changes in light signals.

The next-generation camera would apparently use lasers invisible to the human eye for advanced features such as 3D selfies, accurate depth mapping, 3D modeling and more.

iPhone 8's image sensors should be built by Sony, like before.

Largan CEO Adam Lin said in a press conference this week after the company's annual general meeting, as reported by Nikkei, that they will have lenses for a 3D-sensing module “used in a smartphone ready to ship in the second half this year”.

No phone vendor has officially announced a device with 3D lenses, leaving only iPhone 8 as the most likely phone with 3D lenses that'll be ready to ship in the second half of 2017.

Jeff Pu, an analyst at Yuanta Investment Consulting, estimates that Largan will supply 90 percent of rear-camera lenses for 2017 iPhones, around half of the 3D-sensing lenses and up to one-third of the front camera lenses. Foxconn-controlled Genius Electronics Optical and Japan's Kantatsu are said to compete for the rest of the iPhone 8 orders.

Image: iPhone 7 Plus dual-camera system with Largan-made lenses.

Foxconn and Sharp buying a stake in micro-LED startup eLux

Christian Zibreg ∙ May 24, 2017

Apple's favorite contract manufacturer Foxconn Electronics is teaming up with its display-making subsidiary Sharp to acquire a 31.82 percent stake in eLux, a Delaware-based startup engaged in research and development of micro-LED technology and its application to virtual reality and augmented reality devices.

The American startup was established in October 2016 by researchers formerly employed at Sharp's research facilities across the United States.

Sharp says it will team with CyberNet Venture Capital, panel maker Innolux and Advanced Optoelectronic Technology (all affiliated with Foxconn) to buy eLux in October.

Nikkei said earlier this week that Sharp will take a stake of just over 30 percent in eLux, valued at $7 million, in exchange for related patents. Additionally, the Japanese giant will transfer 21 patents regarding micro-LED technology to eLux, said DigiTimes.

Apple is apparently serious about this promising new display technology.

Aside from acquiring micro-LED specialists LuxVue back in 2014, the Cupertino company could kick off trial production of micro-LEDs by the end of 2017, with Apple Watch Series 3 likely switching from OLED to micro-LED display technology.

Power-conserving micro-LEDs consist of small, light-emitting diodes that render images.

They're capable of boosting battery life by as much as 300 percent versus LCDs. The technology allows for improved color gamut and up to two to three times the brightness of OLED-based screens under the same power consumption.

Apple could start building micro-LED screens by end of 2017

Christian Zibreg ∙ May 24, 2017

Despite many technological bottlenecks, Apple could kick off trial production of the power-efficient display panels based on a relatively new and unproven micro-LED technology by the end of this year. According to a supply chain report Wednesday from Taiwanese trade publication DigiTimes, the Cupertino giant is likely to crank out a small volume of micro-LED display products from its plant in Taoyuan, northern Taiwan at the end of the year.

Other companies are looking to commercialize micro-LEDs, too.

Samsung-owned PlayNitride should install a production line for micro-LEDs in the second half of 2017, which will use a mass-transfer process that mounts micro-LED chips on thin film transistor substrates. Micro-LED are so small that a five-inch 400-by-600 pixel smartphone panel requires nearly one million and a 4K TV panel about 50 million tiny chips.

PlayNitride doesn't expect first micro-LED-based mobile products to appear before 2019.

Taiwan's Industrial Technology Research Institute is expected to tie up with local businesses to begin trial production of micro-LEDs in 2018, using its in-house developed technology.

Let's not forget Apple's contract manufacturer Foxconn, which recently announced plans plans to acquire display startup eLux for the development of next-generation micro-LEDs.

Apple itself acquired micro-LED specialists LuxVue three years ago.

Business Korea claimed last month that Apple Watch Series 3 is likely to use a micro-LED display before the technology proves feasible enough to be deployed on a mass-scale across Apple's iPhone, iPad and Mac devices.

Samsung Display and LG Display, which currently supply LCD screens for Apple devices, could lose around $1 billion per year should the iPhone maker adopt micro-LEDs.

As we explained before, micro-LEDs could pave the way for Apple devices with longer-lasting batteries and brighter screens. As you know, traditional LCD-based screens waste a lot of energy because they require a backlight.

In addition to boosting battery life by as much as 300 percent versus LCDs, micro-LEDs allow for higher-resolution screens with improved color gamut and two to three times the brightness of OLED technology under the same power consumption.

Image: LuxVue's patent related to commercialization of Micro-LEDs, now owned by Apple.

Apple suppliers prepping to stockpile A11 chips for upcoming iPhones

Christian Zibreg ∙ Updated April 25, 2017

Quarterly chip demand for iPhone is predicted to surpass 50 million units in the second half of this year as Apple begins to stockpile next-generation processors and other chips for 2017 iPhones, trade publication DigiTimes said Wednesday. Chip orders should hit a total of between 220 million and 230 million units between the end of the second quarter and the beginning of the third. This implies strong projected demand for the OLED-based iPhone 8 and the iterative LCD-based iPhone 7s and iPhone 7s Plus updates.

Three major Apple suppliers have submitted preliminary bids for Toshiba’s flash chip business

Christian Zibreg ∙ April 10, 2017

In the coming weeks, Toshiba will unveil a final decision concerning selling a majority stake in its lucrative memory business. Bloomberg reported this morning that iPhone manufacturer Foxconn's preliminary bid for Toshiba's semiconductor unit is valued at a whopping $26.93 billion. According to Bloomberg's sources, that amount is in part to force negotiations, using a bid that's too high to ignore.

SK Hynix unveils 72-layer 256Gb 3D NAND flash memory chips suitable for future iPhones

Christian Zibreg ∙ April 10, 2017

Apple supplier SK Hynix unveiled 72-layer, 256-gigabit (Gb) 3D NAND flash memory chips based on triple-level cell arrays. By stacking 1.5 times more cells than the company's previous 48-layer technology, a single 256Gb NAND flash chip can represent 32 gigabytes of storage with two times faster internal operation speed and twenty percent faster read/write performance than a 48-layer 3D NAND chip.