(Bloomberg) -- Apple Inc. will soon land a second supplier for the organic light-emitting diode screens used in high-end iPhones, according to people familiar with the matter, a key step in the U.S. company’s push to reduce iPhone costs and its dependence on Samsung Electronics Co.
South Korea’s LG Display Co. will initially supply between 2 million and 4 million units, small relative to Apple’s sales, as it continues to work on ramping up capacity, said one of the people, who asked not to be identified because the matter is private. That would however help Apple gain leverage in price negotiations with Samsung, the sole supplier of OLED displays for the iPhone X and Apple’s primary rival in smartphones. The expense of that component is a key reason iPhone X pricing starts at $1,000 and sales haven’t met initial expectations.
A successful supply deal would help both Apple and LG. The Cupertino, California-based company would be able to buy significant volumes from LG for next year’s iPhone model, as it tries fight off a slump in smartphone sales. LG needs a fresh source of revenue as it battles a slide in the price of liquid crystal displays.
“Securing a second supplier for OLED screens is crucial for Apple as it will allow the company to reduce its reliance on Samsung, which is currently the sole supplier,” said Jerry Kang, a senior principal analyst at IHS Markit. “At the same time, it will help accelerate a broad adoption of OLED screens. More suppliers means more volume, and in turn, lower pricing.”
The first OLED screens from LG will be used in one model of the new iPhones slated for release this year, the people said. LG wants to supply all the screens for that Apple model, though it’s not clear it can yet achieve that, one of the people said. The shipment is subject to two layers of approval, the first of which is expected around July, the people said.
Apple and LG Display declined to comment. LG Innotek Co., a supplier to LG Display, reversed losses to rise 0.4 percent in Seoul. Samsung Electronics and LG Display fell with a broader slide in the Korean market.
Apple plans to release a trio of smartphones later this year, including two with OLED screens, Bloomberg News reported earlier this year. The latest move doesn’t indicate Apple is aiming for adoption of OLED screens for all of its iPhones next year and it’s more about diversifying its suppliers, one of the people said.
LG Display has been investing billions of dollars into the next-generation technology, which boasts more accurate colors and a thinner structure than LCDs. But it has fallen behind Samsung in signing a deal to supply screens for Apple’s OLED iPhones, as it maintained momentum in developing larger-sized screens. Apple is also in discussions with China’s BOE Technology Group Co. to supply OLED displays for iPhones, Bloomberg News reported in February.
Separately, Apple and Samsung told a judge Wednesday they’d resolved their last remaining legal dispute in a seven-year patent battle. The string of lawsuits started in 2011 after Apple co-founder Steve Jobs threatened to go “thermonuclear” on rivals that used the Android operating system.
The ensuing litigation cost each company hundreds of millions of dollars in legal fees, and tested their reputations as innovators. The companies didn’t disclose the terms of the accord.
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