In a report that recently appeared in Japanese publication, Nikkei Asian Review, Apple (NASDAQ:AAPL) plans to migrate from LCDs to OLED-based displays for its iPhone product lineup beginning in 2018. Given that Apple launches iPhones on a yearly cadence, this timing suggests the iPhone 8 will be the first iPhone to use an OLED-based display.
Let's take a closer look at what other details the publication had to share with respect to this decision.
The technology still needs some fine tuning
Although other smartphone vendors have used OLED-based displays, the technology apparently still has some kinks that Apple and its suppliers need to work out in order to make it viable for a future iPhone.
The report claims the "brightness, energy-saving capacity and other functions of OLED panels tend to degrade over time." Given Apple's reputation for building durable, high-quality devices that last, such degradation is likely unacceptable to the iDevice maker.
This is why Apple has reportedly begun working with both the OLED display vendors and their equipment suppliers in a bid to try to fix the issues associated with current OLED display technology.
The winners here? LG, Samsung, and Universal Display
According to the article, Apple's archrival Samsung (NASDAQOTH:SSNLF) is "currently the only company that can reliably mass-produce OLED smartphone screens."
The report also says that in light of this, as well as the fact that LG Display (NYSE:LPL) has experience building large-screen OLED TVs (as an aside, LG Display is said to be the manufacturer of the OLED displays found on the Apple Watch), Samsung and LG will be the primary vendors of these displays.
Additionally, shares of Universal Display (NASDAQ:OLED) -- which fellow Fool Steve Symington has been bullish on for quite some time -- rallied significantly on this report. Universal Display develops and licenses OLED intellectual property to display makers; it also supplies materials required to manufacture such displays to display makers.
Who are the losers in this arrangement?
Since Apple now buys more than 200 million smartphone displays per year, a shift from LCDs to OLEDs for its high-volume iPhone lineup is expected to have a deleterious impact on Apple's current LCD panel makers as well as other vendors that supply LCD-related components to Apple (such as LCD backlights).
The Nikkei Asian Review report says the two companies that will be negatively affected are Sharp, which is said to be "scrambling to rebuild its faltering operations," as well as Japan Display, which DigiTimes recently reported is expected to be Apple's top display supplier throughout 2016.
What does this mean for iPhone?
OLEDs are known to have a number of advantages over LCDs. OLEDs do not require a backlight since pixels themselves emit light as electricity is applied. The lack of a backlight is known to allow for both a thinner device as well as essentially "perfect" black levels, leading to virtually infinite contrast ratios.
Apple has always placed a lot of emphasis on the quality of its displays, and if it can 00 along with its partners -- develop high-quality OLED displays, this could lead to thinner devices with much-improved contrast over the iPhones currently available in the market.
What will Apple do in the meantime?
Three years is quite a long time from now. Apple will need to get through both the iPhone 7 and the iPhone 7s generations before it is able to use OLEDs.
I believe that with the iPhone 7/7s displays, Apple and its LCD suppliers will be able to wring out improvements in color accuracy, resolution, brightness, and contrast ratio in order to deliver leadership mobile displays.
In fact, there are already mobile LCDs on the market that actually pull ahead of those found on the iPhone 6s/6s Plus in terms of contrast ratio, black levels, white point, and more. Investors and consumers alike should still expect a big jump in display quality with the iPhone 7/7 Plus next year, even with the move to OLEDs seemingly not happening until 2018.
Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple and Universal Display. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.