Mobile

Apple’s new phone frees Taiwan from Korea

Written by - Reviewed by Glozine Team

Published: Jun 25, 2014 | Last Updated: Aug 10, 2016

The highly anticipated iPhone 6 could drive a wedge between Taiwan and South Korea. South Korea and Taiwan have always moved together in factory output to meet global technology demand.

Apple is trying to reduce its dependence for parts on Samsung Electronics, and the entry of iPhone 6 could see Taiwan finally pulling away from Korea.

Taiwan’s industrial production index beat economists’ forecast rising to 5.2 percent on-year in May. Korea’s May industrial report will be out on Friday, but its April production went down from 2.6 on-year in March to 2.4 percent.

Taiwan and South Korea have long been regarded as closely linked for global trade growth by many investors; more so for the global electronic demand. They have become contract manufacturers for big companies following Japan footsteps. And even though the two countries produced a lot of the same stuff – personal computers, computer chips, flat-panel screens and smartphones, Korea’s LG Electronics and Samsung eventually managed to become brand names of their own.

It did not matter much that Taiwan was the base for Hon Hai, the owner of the company that assembles the iPhone, Foxconn International, and Korea was the base for Samsung. While Samsung supplied up to 25 percent of the iPhone parts by value, it also makes its own smartphone.

According to the data from Thomson Reuters, between the time Apple launched its first iPhone in 2007 and Samsung released its first Galaxy in 2009, the 12-month correlation between Taiwan’s industrial production growth and Korea’s short from 0.36 to a high of 0.98. The correlation went low a bit but still averaged 0.84, compared to a 0.62 correlation before Galaxy was released (note that 1 represents a strong correlation while zero signifies no correlation). This implies that Smartphones had become the driver of industrial output in both countries.

This strong linkage between South Korea and Taiwan is now strained as a result of the rivalry between Apple and Samsung. Apple accused Samsung of copying its designs leading to a legal battle between the two.

This has resulted in Apple trying to cut links with Samsung. It is now buying its flash memory chips from Toshiba, but it can not say where it is buying its touch-screens, thought analysts believe it buys them from LG Display, Sharp, Japan and possibly Toshiba. The touch-screen is the most expensive part of the iPhone, it goes at $41 each.

However, Apple still relies on Samsung to provide the iPhone’s microprocessor, which is the most important part of the device.

In 2013, Apple signed a deal with TSMC to start providing it with microprocessors for iPads and iPhones this year. This means the iPhone will most likely be powered by TSMC’s A8 chip when it will be launched later in the year.

This year alone, foreign investors have bought $8.3 billion worth of Taiwan stocks, a strong indication that they might be moving to Taiwan along with Apple. In Korea, only $1.8 billion worth of stocks have been bought by foreign investors.

This has seen Taiwan’s benchmark stock index surging to 7.4 percent this year. This is the highest level it has attained since late 2007. Koreas benchmark index only rose 2.9 percent.
TSMC’s stock rose by 17 percent this year, while Samsung’s dropped by 2%.

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