Supply Chain Matters highlights two significant developments related to consumer electronics and smartphone provider Apple that occurred last week.

Apple Component Design Shift in Custom Displays

Citing sources with knowledge of the matter, Bloomberg reported (Paid subscription or metered view) that Apple has plans to begin utilizing custom electronic displays utilizing its own custom in-house development designs.

The move is characterized by Bloomberg as an effort to: “reduce its reliance on technology partners like Samsung and LG and bring more components in-house.” In addition to these two suppliers, others are reportedly Japan Display, Sharp and BOE Technology Group. For some of these latter suppliers, such a move would be significant in terms of revenue impact.

This development effort reportedly began in earnest in 2018, with the first application being the display for the highest-end models of the Apple Watch by the end of 2024. However, the report indicates that the introduction could slip into 2025.

Apple declined to comment to Bloomberg regarding its published report.

The technology foundation is that of microLED as opposed to current OLED screen technology. Reportedly, plans further call for supplying electronic displays to other Apple hardware including the iPhone line-up after 2024.

This move is characterized as maintaining more direct control of the supply chain. We would clarify in that this move plays more to supply network vertical integration.

The reporting indicates that it is unclear as to whether Apple will elect to have and existing display supplier undertake volume manufacturing efforts or whether that would fall under one of the company’s contract manufacturing suppliers.

Apple has already embarked on in-house design and development of its own proprietary microprocessor semiconductor chips, and recently indicated that such chips will be fabricated in a newly proposed TSMC fabrication facility planned in the U.S..


Apple CEO Tim Cook Taking a Pay Cut in 2023

Business media reports indicate that Apple CEO Tim Cook has voluntarily asked for total compensation cut for 2023. Reportedly his total compensation target this year will amount to $49 million, according to a securities filing by the company. The compensation will consist of a base salary of $3 million, an incentive bonus of $6 million, and $40 million of the company’s stock. The $49 million number is more than 40 percent lower than Cook’s compensation level last year.

Then there is the speculation that the company’s stock has declined upwards of 25 percent in 2022 when the company’s senior executive’s have bonus structures pegged to stock performance.

According to reporting from The Wall Street Journal, the median compensation for CEO’s of the largest U.S. companies was $14.7 million in 2021.

The filing indicates that the compensation changes: “are responsive to shareholder feedback, while continuing both to align pay with performance and recognize Mr. Cook’s outstanding leadership.

According to reporting from The, the decision by Cook comes after criticism from some investors regarding such overall compensation. Prominent investor advisory firm Institutional Shareholder Services (ISS) had recommended that shareholders vote against the package awarded at the last shareholder annual meeting. ISS further indicated that Cook has been paid 1,447 times more than the average Apple employee. The report intimates that Cook may have agreed to a lower compensation to avoid what could have been a further non-approval vote by shareholders.

To be balanced, Cook has consistently indicated that he will continue to share a good amount of his acquired wealth with charities.


The Irony

The irony of the compensation reduction comes as the consumer electronics icon continues to deal with the effects of the iPhone14 production disruptions that occurred at the Foxconn massive “iPhone City” production complex in Zhengzhou, China, the impact of which will not be exactly known until Apple formally reports quarterly financial performance on February 2. Wall Street analyst have already lowered their sales expectations for Q4 by $4 billion. Backlogs of unfulfilled iPhone14 orders are expected to continue into Q1 of this year.

Meanwhile, the next supply network pivot is focused on India, another lower-cost manufacturing move.

Industry research firm Canalys has reported that global shipments of smartphones fell 17 percent in the final quarter of 2022, which is typically the largest holiday fulfillment quarter. Full year volumes reportedly decline 11 percent to fewer than 1.2 billion smartphones. Apple reportedly commands 25 percent global market share, but Samsung was crowned the 2022 volume leader. Manufacturers are reportedly positioning this year with caution, prioritizing profitability.

Speaking of profitability, Apple reportedly bought back almost $90 billion worth of its own shares in fiscal 2022 which ended in September. In fiscal 2021, stock buybacks amounted to $85.5 billion, and dividends paid to shareholders amounted to $14.5 billion.

The irony is that shareholders that are concerned about the optics of the CEO’s salary are not so for the optics of shareholder returns that can exceed the company’s R&D budget.

So are these times.


Bob Ferrari

© Copyright 2023, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.