A report in DigiTimes recently indicated that Apple's (NASDAQ:AAPL) iPhone 8 supply could be constrained at launch, at least in part because of trouble getting OLED displays from Samsung (NASDAQOTH:SSNLF).
Current iPhone models use liquid crystal displays (LCDs), which can be sourced from a wide variety of manufacturers. However, high-quality mobile OLED-based displays -- which offer some critical advantages over LCDs in image quality, response time, and form factor -- aren't available from a wide range of suppliers.
Samsung is the leading vendor of mobile OLED-based displays, and its ability to meet Apple's volume and quality requirements is said to be why the former will supply all of the iPhone 8 OLED-based displays. With that in mind, perhaps it's not a surprise that AppleInsider's Mike Wuerthele suggests the DigiTimes story is "questionable."
"Should the earlier reports of Samsung being the screen supplier for the device be accurate, it seems improbable that the company that cranks out the vast majority of the world's [mobile OLED display] supply should be having unspecified issues in delivery," Wuerthele wrote.
I have no idea if the DigiTimes report is true, but I do think that such issues -- even though Samsung builds lots of mobile OLED displays and has been building them for years now -- are as unlikely as they might seem.
Not all mobile displays are created equal
Just because a mobile display is based on a certain type of technology -- say, OLED or LCD -- that doesn't mean it's just as easy or difficult to manufacture as other displays based on the same technology. The LCDs Apple uses in its iPhone and iPad devices tend to be a cut above those of many of their peers, offering things such as superior color accuracy, contrast ratios, viewing angles, or refresh rates.
Remember: Apple has a lot of display technologists among its engineering staff, to help develop the display technologies that go into its devices and to collaborate with its display manufacturing partners, even if it doesn't handle the final manufacturing of those displays.
So while Samsung Display seems to be doing fine supplying OLED-based displays for its Samsung Galaxy line of smartphones, as well as to some other smartphone vendors, neither Samsung Mobile nor the other smartphone vendors might have the kind of stringent display performance and quality requirements that Apple has.
Such requirements could lead to lower effective yield rates, as Apple may simply not accept displays that, to another customer, would be passable. Lower effective manufacturing yield rates can lead to production bottlenecks.
Apple's volumes are really huge
In addition to being a demanding customer in terms of component quality and performance, Apple simply demands a lot of components because it builds and sells a lot of iPhones.
The Samsung Galaxy S8 and future Galaxy Note smartphones may be quite popular relative to other premium Android-based flagship devices, but the launch-quarter and lifetime shipment volumes of a flagship iPhone certainly dwarf those of flagship Samsung phones.
What this means is that supporting the launch of a new iPhone is an entirely different animal from supporting a Galaxy S or Galaxy Note launch.
It's at least plausible that sourcing adequate displays for this year's iPhone models could cause a supply-chain problem. If Apple can't get the displays it needs, then it risks creating a supply to-demand imbalance for its upcoming iPhone 8. That's not the end of the world for Apple, particularly as the company will probably still take orders but inform some customers that their new iPhones might not be there for several weeks or even months. Even so, it's a less than ideal scenario.
That said, it's far better that Apple build a product that's so in demand that it suffers a near-term supply/demand imbalance than to build a modest and boring smartphone that's straightforward to manufacture but not particularly desirable.