Samsung (NASDAQOTH: SSNLF), arguably Apple's fiercest direct competitor in the premium portion of the smartphone market, is reportedly the sole supplier of the organic light-emitting diode displays that'll be found on this year's iPhone models.
It's no secret that other mobile display makers -- desperate to not be left behind as the smartphone industry transitions to OLED displays from traditional liquid crystal displays -- are investing heavily in OLED manufacturing technology and capacity. And now a July 28 report from The Korea Herald says Apple will invest $2.7 billion "in LG Display's (NYSE:LPL) OLED production for smartphones."
"Apple will reportedly make the investment as advance payment for the planned panel supplies," The Korea Herald said.
This isn't the first time this rumor has come up; The Korea Herald reported on July 3 that Apple was in talks with LG Display to invest between 2 trillion and 3 trillion Korean won (approximately $1.8 billion to $2.7 billion) in LG Display's OLED production lines.
Seemingly corroborating this report and offering some additional details about Apple's and LG's potential OLED display partnership is a research note from KGI Securities analyst Ming-Chi Kuo, by way of MacRumors.
LG Display reportedly comes on board in 2018
Kuo thinks Apple is "committed to having [LG Display] geared up for its OLED iPhone display business in 2018 as it seeks to reduce supply risks."
"Even though [LG Display] may likely start off with minimal initial penetration in 2018 (we estimate no more than 4%-6%), the effort, with the full commitment of both Apple and [LG Display], will help [LG Display] mature during the process and steadily gain supply share from 2019 onward," Kuo writes.
The analyst then reportedly predicted that LG Display could get between 10% and 20% of Apple's iPhone OLED display orders in 2019, and then between 20% and 30% share in the following year.
If LG Display can deliver, then that'd be great for it, great for Apple, and an obvious negative for Samsung's display business as it loses OLED display pricing power and unit share.
Furthermore, while the discussion here is focused on LG, it wouldn't be surprising if Apple were "grooming" other display vendors -- Japan Display comes to mind -- to bring them into the fold as well. When trying to drive component pricing down, and therefore iPhone margin up, the more suppliers there are for a given component, the merrier.
OLED-based displays seem to be the next big step in display technology for Apple's iPhone and iPad. Apple's premium iPhone model should get it this year because the device will probably be priced richly enough to allow Apple to equip them with relatively pricey OLED displays while still maintaining acceptable gross profit margin levels.
However, for Apple to proliferate this technology across a wider range of price points, it needs more industrywide supply available at lower per-unit costs. Working to enable multiple sources for such a critical component and technology is the right way to go -- and just another example of the company's supply-chain mastery.