Due to restrictions on AI products’ usage in China, Apple is actively seeking Chinese partners to advance in the local AI application market. According to the latest report by the Economic Daily News, the tech giant has been engaged with Chinese firms such as Baidu, Alibaba, and Baichuan Intelligence to push AI efforts. While the move helps to boost these firms’ investment in AI server infrastructure, it may further benefit Taiwan’s AI server supply chain.

The report noted that the industry is optimistic about Baidu’s potential cooperation with Apple, while Alibaba is also a strong competitor. Taiwanese contract electronics manufacturer Inventec, a contract manufacturing partner for both Baidu and Alibaba’s servers, thus reportedly positions itself as a major winner in Apple’s bid to capture the Chinese AI application market.

It is worth noting that Inventec has formed strong partnership with Baidu, as the company has been providing customized server manufacturing services for the Chinese search engine leader for 13 years, according to the report. Inventec has been a key partner since the second generation of Baidu’s super AI computing platform, X-MAN 2.0, which addresses cooling challenges with cold plate liquid cooling technology.

Inventec’s clients include the four major North American cloud service providers (CSPs) as well as Chinese CSP giants such as Baidu, Alibaba, Tencent, and ByteDance.

Based on the information disclosed on its official website, Inventec not only builds edge computing products for brand-name server customers, but also focuses on customizing designs to meet cloud clients’ demands for deep learning, training, and machine learning by maximizing the synergies between CPU and GPU.

The pressure Apple has been facing in the Chinese market, on the other hand, is escalating in the AI arena. As China is Apple’s largest market for iPhones outside the United States, in order to bring AI functions into its devices, Apple is still searching for a Chinese AI partner to support its new iPhone launch in a few months.

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(Photo credit: Inventec)

Though being capable of running AI features may be the primary focus for global smartphones this year, due to restrictions on AI products’ usage in China, the Wall Street Journal reports that the upcoming new iPhone, expected at the end of the year, will not be able to use ChatGPT in China. Apple has reportedly been in discussions with companies like Baidu for potential partnerships, but no progress has been made yet.

China is Apple’s largest market for iPhones outside the United States. While smartphones from various brands will integrate AI this year at full throttle, incorporating apps like OpenAI’s ChatGPT, these apps from Western countries are not permitted for use in the Chinese market. According to the Wall Street Journal, industry insiders indicate that Apple is still searching for a Chinese AI partner. However, with the new iPhone set to launch in a few months, no progress has been made.

Notably, as per a report from TrendForce, in the first quarter, Apple faced a decline in sales in the Chinese market, resulting in a  drop in annual production to 47.9 million units.

In China, companies must obtain government approval to release AI devices. As of March this year, the Office of the Central Cyberspace Affairs Commission has approved 117 generative AI products, none of which are from brands outside of China.

The Wall Street Journal, citing industry sources, reported that Apple had tentatively inquired with Chinese authorities earlier this year about the possibility of allowing foreign language AI models on their smartphones. While believing approval to be unlikely, Apple has reportedly sought partnerships with local companies instead.

One of Apple’s main competitors, Samsung, has already launched the Galaxy S24 this year, featuring real-time translation and AI-enhanced photo editing and search capabilities. Samsung’s phone includes its own generative AI and also collaborates with Google. However, since Google’s AI tool Gemini is not permitted for use in China, Samsung has shifted to partnering with Baidu and Meitu AI.

It is not new for global tech companies to adjust their product and service offerings to cater to the Chinese market. For example, Apple uses state-owned enterprise servers for iCloud in China, and the recently launched Vision Pro cannot stream Apple TV+ in the country.

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(Photo credit: Apple)

Novatek, a major driver IC manufacturer in Taiwan, entered the iPhone 16 supply chain early this year and secured certification ahead of its competitor LX Semi. However, according to a report from Commercial Times citing sources, its Korean competitor, LX Semi, recently also obtained certification and, with strong support from foundries, is challenging Novatek’s exclusive supply position.

The same report continues to cite sources indicating that LX Semi remains the exclusive supplier for iPhone 16 Pro/Pro Max’s LG Display (LGD) OLED screens in the second half of the year, with significant acceleration in chip production starting in September. It is estimated that the order allocation between Novatek and LX Semi will be 55:45.

Industry sources cited by Commercial Times reveal that LX Semi has a closer partnership with leading foundries, compared to Novatek’s previous strategy of relying on established foundries. Reportedly, another sources confirms as well that LX Semi has recently been certified and, with support from foundries, will begin significant wafer production by the end of the third quarter.

Other industry sources cited by the report further pointed out that Apple’s OLED panels are supplied by Korean manufacturer LGD, while LX Semi was originally LG Group’s subsidiary. Therefore, after LX Semi obtained certification, they increased orders from LGD, thereby reducing the originally planned procurement of OLED driver ICs from Novatek. However, for Novatek, they still heavily rely on Apple orders. If shipments go smoothly, they are expected to further secure opportunities in other product lines, such as iPad OLED DDIs and Apple Watch.

Yet, concerns are also noted, as the report brought up that the momentum in TV applications accompanying sports events is expected to slow down. Additionally, subdued sales during China’s 618 shopping festival and a conservative attitude among brand manufacturers in the second half of the year may affect demand for components like DDICs.

Therefore, Novatek keeps investing in establishing OLED production lines in order to seek new breakthroughs, such as IT TCON (timing controller) products. These products are manufactured using a 12-nanometer advanced process to create efficient computing units, integrating UHD 240Hz LCD and OLED panel display compensation functions, targeting high-end laptops.

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(Photo credit: Novatek)

Apple is reportedly shifting its mixed reality (MR) device strategy by abandoning the development of its existing high-end Vision Pro headset in favor of launching an affordable MR device expected to debut next year. According to a report from Economic Daily News, it’s rumored that Foxconn is likely to replace Luxshare as the manufacturer for Apple’s affordable MR device, although Foxconn typically refrains from commenting on order specifics and client relationships.

Alongside this move, Apple reportedly plans to incorporate AI capabilities into the product, which is anticipated to significantly boost sales of the affordable MR device. Per the sources cited by the same report, they are optimistic that companies like Genius Electronic Optical (GSEO) and GIS Industries are poised to benefit from the opportunities.

According to a report from tech media outlet The Information citing sources, Apple initially planned to release two versions of the Vision device, akin to the standard and Pro versions of the iPhone. However, Apple is said to have informed at least one supplier to halt the development of the next-generation high-end Vision Pro headset.

Recently, Apple has planned to launch the USD 3,500 Vision Pro in eight new markets, including China and Japan. However, The Information, citing a source from a supplier, reported that after receiving Apple’s forecast of weakened demand for the Vision Pro by August, the supplier cut production by half in May.

The sole supplier, which has no competitors, produced approximately 460,000 Vision Pro components in the first four months of this year and plans to produce an additional 100,000 components from May to August. This suggests that Apple expects to produce at most around 500,000 units this year, with no significant production increase before August.

The Information revealed that Apple started developing a more affordable version of the Vision product in 2022, internally codenamed “N109.” According to the report, Apple is also trying to reduce the weight of the budget version by at least one-third compared to the Vision Pro. It is further reported that Foxconn will replace Luxshare as the manufacturer for Apple’s affordable MR device.

Industry sources cited by the same report indicated that Apple has already announced Apple Intelligence, confirming that AI applications will be integrated into all future devices. The next generation of MR devices, featuring more AI functions and applications along with a more affordable price, is expected to boost demand and significantly increase shipment volumes, benefiting Foxconn.

Other Taiwanese collaborators are also poised to benefit. GSEO has gradually been obtaining orders from the supply chains of Sony, Meta, and Apple, providing lenses and components for VR/MR headsets. GSEO expects VR-related applications to account for 20-30% of its revenue this year.

GIS plays a crucial role in the Vision Pro supply chain, handling the most technically challenging lens bonding tasks. Its production base is located in Chengdu, China, and it is generally anticipated to be part of the supply chain for Apple’s affordable MR headset as well.

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(Photo credit: Apple)

Novatek, a major driver IC manufacturer in Taiwan, has made a significant breakthrough by securing a spot in the iPhone supply chain. According to a report from Economic Daily News, Novatek’s OLED driver IC is reportedly set to be used in Apple’s upcoming iPhone 16 series, which would be the first time a Taiwanese IC design company has secured a key chip order for the iPhone. Reportedly, the order is expected to boost NovaTek’s OLED driver IC shipments in the second half of the year by 50% compared to the first half.

As the new iPhone 16 series will debut in September, reports indicate that the model will feature the latest A18 processor, produced using TSMC’s N3P process, with mass shipments expected in the third quarter.

The iPhone 16 series will continue to equip OLED panels, but with expected pixel upgrades, which will also enhance the specifications of the OLED driver IC. Novatek will supply the OLED driver IC for the new iPhone, marking its first entry into the iPhone supply chain and the first time a Taiwanese IC design company has secured a key chip order for the iPhone, the report noted.

Novatek typically does not comment on orders or customers.

Previously, Novatek’s driver ICs have been adopted by Apple’s iPad for several years, but unable to secure an iPhone order. This breakthrough comes as Novatek penetrates the iPhone 16 supply chain via the collaboration with LG Display (LGD) of South Korea, combining with LGD’s OLED panels for shipment.

According to the industry sources cited by the same report, Novatek will begin delivering the OLED driver ICs to LGD in July. These ICs will be assembled into panel modules in the third quarter and then sent to OEMs for new device production, aligning with the AI iPhone launch.

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(Photo credit: Novatek)