Tech Financial Analysis estimates that Apple pays $55 to Samsung Display for the iPhone 11 Pro OLED display. We estimate Samsung Display’s sales price in our Q3 2019 Cost Model. Subscribers use our Cost Model for sourcing and engineering purchasing negotiations.
We estimate a Samsung 5.8” OLED display on flexible substrate ranges in prices between $47 to $75. The range depends on the negotiated EBITDA margin, yield, and fab utilization. The $55 iPhone 11 Pro Display price is a large decrease from prior competitor OLED display estimates. The reasons for the decrease are:
- Supplier profit margins have been reduced due to the industry oversupply.
- Display manufacturers have negotiated with sub-supplier for components pricing reductions.
- Device BOM teardown calculations are incorrectly performed.
Historical iPhone BOM Teardown Process
Competitor teardowns start by estimating the total Bill of Material (“BOM”) cost. Then competitors focus on the BOM components. The iPhone X display was estimated to be $110 to $120 per display. From our hardware experience, a teardown's device BOM cost is approximately equal to the actual contract manufacturer’s ("CM's") transfer price. However, that is where the accuracy ends. Apple’s Tim Cook has always been critical about BOM teardowns. A device teardown's individual component prices are frequently highly inaccurate. We calculated a lower price for the iPhone X display in our Cost Model and now calculate an even lower cost for the iPhone 11 Pro display.
Device teardowns have 30%+ pricing errors on the individual components because the typical device teardown process starts from tops down estimates.
- Contract manufacturers provide the transfer price (total device BOM price) to trade authorities and to teardown companies. Because of the virtual paperwork there are many steps for discovery in the process (e.g. tax and trade parties, etc.).
- Strategic high-cost components can be price-masked. Apple's suppliers pricing or Apple's internal price (e.g. A13) may be increased so that the CM and the CM's other customers do now know scale pricing.
- Teardown companies obtain accurate commodity components pricing via online sites.
- Finally, teardown companies estimate higher priced components (SOC, Display, Memory, etc.) by allocating the remaining costs (less the commodity parts) based on other teardowns.
If the total transfer price is inflated due to strategic components being price-masked the remaining components will be inflated. The device teardown process contains estimates stacked on top of estimates. A bottoms-up cost model includes estimates, but the increased details improve accuracy. And a bottoms-up estimate increases information to challenge the supplier.
Bottoms-Up Display Estimates
Tech Financial Analysis focuses solely on a specific display subsystem of the device. We work from the bottoms-up like the supplier’s (i.e. SDC) sales and finance teams. We spread the fab’s actual costs over the fab’s utilized output. Additionally, we use actual average component pricing (touchscreen, glass, etc.). As a result, our Cost Model improves component negotiations.
Below is a screenshot from our Q3 Should-Cost Model available for subscribers. This is based on SDC using its A4 fab for production of the iPhone 11 Pro display. We then calculate how many 5.8” displays reside on a Gen 6 sheet (i.e. A4’s motherglass). From there we calculate the following costs:
- OLED Emissive & Comment Materials
- Color Filter
- Touch Sensor & Cover Glass
- Module Assembly
- PCB & Driver IC
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iPhone 11 Pro Display Should-Cost Model
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