CITIC SEC: Apple Inc. (AAPL.US) Folding Screen Material Innovation and Opportunity: Solving creasing and fragility issues are key directions.

CITIC SEC released a research report stating that the possibility of Apple Inc. (AAPL.US) entering the foldable screen market is still a focus of industry attention, providing new development opportunities for material companies in the related supply chain. Optimistic about Apple Inc.'s technical innovation capabilities and its leading role in the mobile phone industry. Apple Inc. is driving the development of directly related materials through the technological upgrade of its foldable screen, recommending etching component suppliers, carbon fiber support component suppliers, and UTG glass suppliers. The main points of CITIC SEC are as follows: Foldable smartphones face two major pain points: screen fragility and middle fold crease, and the market expects Apple Inc. to lead technological breakthroughs. Since the advent of foldable smartphones, they have always faced two core pain points: screen fragility and middle fold crease. Due to the fragility of flexible screen materials, issues such as drops, wear and tear, or water ingress can accelerate damage, while the middle fold crease directly affects user experience and aesthetics. Although Android manufacturers have made some technological breakthroughs, they have not yet achieved a truly "0 fold crease" effect. In this race, Apple Inc. as the innovative leader of high-end models has not yet launched a foldable screen product. The market is full of expectations for Apple Inc.'s entry and believes that its technical capabilities will be a key force driving industry change. Display modules and hinges are the core cost drivers of foldable screens, and technical optimization determines their market reliability. In the cost of foldable smartphones, the display module occupies a dominant position, and its complexity and high requirements significantly raise the overall cost. Taking Samsung Galaxy Fold as an example, the display module cost accounts for 34.36%, much higher than traditional flat-panel smartphones; and mechanical structural components like hinges also significantly increase the cost. Hinges and cover plate technology have become the core solution to screen fold creases and fragility issues. Currently, Android manufacturers mostly use UTG glass combined with Waterdrop, Inc. ADR Class A type hinges to optimize the folding effect, but technological breakthroughs are still needed to completely solve fold creases and fragility issues. Apple Inc. seeks to address foldable screen fold crease and fragility issues through innovative technology. In foldable screen technology development, Apple Inc. strives for perfection. According to patent information registered by Apple Inc. at the US Patent and Trademark Office, Apple Inc. is focusing on solving foldable screen pain points through multiple innovations. Their solutions include adding a support spring layer between the metal support layer under the screen and the base plate to reduce creases and drop damage by dispersing external forces; introducing local thinning design in UTG glass to further reduce visible traces in the folding area; and using self-repairing materials on the screen cover layer to repair scratches and dents. In addition, Apple Inc.'s hinge design will be more precise, optimizing screen fold crease issues by reducing pressure on the screen through complex transmission devices and small gear structures. Apple Inc.'s innovative foldable screen technology drives material upgrades in the supply chain, boosting the foldable screen support parts industry and UTG glass development. In the field of foldable screens, Apple Inc. has significantly improved the screen protection performance by combining the metal support layer with a spring array as proposed in innovative designs from their patents. This technological breakthrough not only enhances the support layer's load-bearing and fold resistance capabilities but also places higher demands on etching processing for high strength, lightweight, and complex structures. At the same time, Apple Inc. continues to use UTG glass technology, further driving market demand and injecting new momentum into the domestic production and thinning processing industry of UTG glass. Apple Inc.'s leading role not only promotes the upgrade of the supply chain, but also opens up new growth space for foldable screen support parts and UTG glass development. According to industry estimates, Apple Inc.'s support parts market is about 18-27 billion yuan, and the UTG glass market is about 155 billion yuan. The possibility of Apple Inc. entering the foldable screen market is still a focus of industry attention, providing new development opportunities for material companies in the related supply chain. Optimistic about Apple Inc.'s technical innovation capabilities and its leading role in the mobile phone industry. Apple Inc. is seeking to address fold crease and fragility issues by introducing innovative technology. Considering the patents related to Apple Inc.'s foldable screen phones, if Apple Inc. launches foldable screen phones, it will drive the development of foldable screen support parts and UTG glass, with two potential development paths for foldable screen support parts being metal etching components and carbon fiber materials. Risks: Risks include lower than expected market penetration of foldable screen phones; macroeconomic changes leading to a decline in demand for consumer electronics; risks associated with Apple Inc.'s new foldable screen technology iterations; and risks related to international trade.