Apple Switch to All OLED IPhone Lineup Seen Unlikely by 2019
(Bloomberg) -- Analysts are pouring cold water on a report that Apple Inc. plans to use next-generation, OLED screens for all of its new iPhone models next year.
The article in South Korea’s Electronic Times, if true, would be negative for major manufacturers like Japan Display Inc. and Sharp Corp., which build LCDs that are used in many phones, but a positive for OLED technology makers like Universal Display Corp. Japan Display shares fell 8 percent Tuesday, while Sharp declined 3 percent. Universal Display shares climbed 4 percent.
Representatives for Apple, JDI and Sharp declined to comment.
Currently, in the smartphone market, there are two primary types of screens: liquid crystal display, or LCD, and organic light emitting diode panels, or OLED. The iPhone 8 and older models use LCD screens, while the iPhone X uses an OLED screen. LCD screens are cheaper to build, while OLED screens reproduce colors much more accurately, but are difficult to produce.
There are several reasons why Apple’s switch to all-OLED phones is unlikely. JPMorgan analyst Jay Kwon said it’s too early for Apple to make such a decision and the OLED screens would make the devices more expensive, defeating the purpose of a cheaper LCD model due out later this year.
Using only organic light-emitting diode screens for iPhones would also be challenging, given the sheer volume that Apple sells: 216 million devices in 2017. Samsung Display Co., part of Samsung Electronics Co., is the sole supplier of OLED screens for high-end Apple phones, but the manufacturer also uses them for its own smartphones, limiting supplies. Other OLED screen makers, like LG Display Co., haven’t shown the ability to churn out Samsung-like capacities.
While Apple has embraced OLED, most analysts said they don’t see the switch happening in 2019.
“It is unlikely that Apple will be releasing three OLED models next year,” said Jeff Pu, an analyst at Taipei-based Yuanta Securities Investment Consulting. The other major OLED supplier, LG Display, has struggled to move into mass production and isn’t likely to boost OLED production for Apple in 2019 from 5 million to 10 million units expected this year, he said.
Still, LG Display shares rose 5.2 percent on the Electronic Times report on Tuesday. Samsung was down 1.9 percent. A representative for Samsung Display declined to comment.
Goldman Sachs Group Inc. analysts were also skeptical, citing recent financial guidance from companies including Japan Display that suggested continued use of LCD technology.
“We think it is unlikely that all 2019 iPhone models will switch to OLED screens and we believe share prices have overreacted,” analysts Daiki Takayama and Jie Dai wrote in note.
One of three new iPhones models last year featured an OLED screen. Apple is on track to use OLED in two of three new models later this year, Bloomberg News has reported. The Electronic Times report suggests a third OLED model next year, but the purpose of such a variant is unclear.
“Ultimately, the plan is for Apple to go full OLED on its iPhones as far as I know but whether that’s going to happen at this point is a question mark,” said Jerry Kang, a senior principal analyst at IHS Markit based in Bundang, South Korea. “Apple hasn’t been able to expand on its iPhone X production because of market demand and price issues.”
Indeed, the cost of OLED technology has been a major concern. Sales of the iPhone X with an OLED screen were crimped by its starting price of $999. Moving to all OLED screens next year would make it difficult to keep iPhones affordable for mass market consumers.
Organic light-emitting diode screens have been embraced as the future of smartphones because they’re crisper and use less power than their liquid-crystal predecessors. They cost more, and can also be problematic. Users of Google’s Pixel smartphone have complained of inaccurate color reproduction and burn-in, where images remain after the screen is turned off. Apple warns on its website that burn-in and slight color changes are "characteristic" of OLED panels.
Arthur Liao, an analyst at Taipei-based Fubon Securities, wrote in a note that he has not heard anything about Apple switching to all OLED models next year from the supply chain in Taiwan.
Apple is also working on its own technology for displays, people with knowledge of the plans have said. Called MicroLED, the screens use different light-emitting compounds than the current OLED displays and promise to make future gadgets slimmer, brighter and less power-hungry.
©2018 Bloomberg L.P.