Apple OLED Screen Talks Nudge Sharp’s Shares Higher

(Bloomberg) -- Shares of Sharp Corp. rose following news that Apple Inc. is in negotiations to secure organic LED displays from the Japanese manufacturer for the iPhone maker’s next-generation of devices.

The Osaka-based company’s stock rose about 3 percent on Monday in early Tokyo trade. Bloomberg News reported on Friday that the companies were negotiating as Apple seeks to boost the number of suppliers for OLED screens, a person with knowledge of the matter said. Shares of Universal Display Corp., a U.S. maker of OLED screens, fell as much as 8.4 percent on Friday before closing higher.

Sharp’s capital investment in OLED is part of 200 billion yen ($2 billion) that the manufacturer had already committed to OLED technology, part of a strategic plan it adopted with new owner Foxconn Technology Group. Next-generation screens based on OLED, or organic light-emitting diode, technology promise more vivid images and less battery drain. Any OLED supply agreement would depend on the Osaka-based company’s output capacity, said the person, who asked not to be identified because talks aren’t public.

Earlier Friday, Sharp announced it will invest 57.4 billion yen for the development of OLED production facilities, with the goal of starting output by June 2018. The funds will be used for equipment in Sharp’s factories in Mie and Osaka, and to deliver sample products to customers, the company said in a statement. The investment will be for smartphone displays, a representative of Sharp said without identifying specific customers.

“Apple has unofficially or as a nod encouraged Sharp to go into it,” said Amir Anvarzadeh, Singapore-based head of Japanese equity sales at BGC Partners Inc., in a phone interview. “Apple’s general strategy is to increase the competition on the supply side, and dilute the risk exposure to one company.”

Sharp spokesman Toyodo Uemura declined to comment on specific customers. An Apple spokesperson in Japan didn’t immediately respond to a request for comment.

“This investment is in response to what Apple is doing,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “Production isn’t likely to begin until the second half of 2018, so the impact to profit won’t be until after that.”

Sharp’s stock has climbed about 10 percent this year, compared with the broader market’s roughly 13 percent decline. Apple accounts for about 27 percent of Sharp’s revenue, according to Bloomberg’s supply chain analysis.

Earlier this year, the Japanese company agreed to accept a rescue package from Foxconn, ending a takeover battle that spanned four years. Last month, the company said its liabilities no longer exceed assets after receiving a 289 billion yen infusion.

--With assistance from Yuji Nakamura To contact the reporter on this story: Takashi Amano in Tokyo at tamano6@bloomberg.net. To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Reed Stevenson, Peter Elstrom