Apple has a unique relationship with Samsung. On one hand, it competes with the Korean firm in the smartphone market, and on the other, it is highly dependent on the company for its smartphones. In fact, Apple seemingly depends too much on Samsung, which is probably the sole provider of the iPhone 8 OLED screen. However, the U.S. firm seems to be working on a plan to end Samsung’s leverage.

iPhone 8 OLED screen
hurk / Pixabay

Lesson learned from iPhone 8 OLED screen supply issues

Apple has gained immensely after Samsung’s Note 7 turn into a disaster, and the iPhone maker appears to be in no mood to suffer supply shortages of components, specifically, the OLED display. Trusted KGI Securities analyst Ming-Chi Kuo believes that Samsung’s OLED technology will be the biggest supply chain bottleneck for Apple in the future. Hence, the iPhone maker has apparently decided to support LG as a supplier.

According Kuo, Apple is making big investment in LG to support its production of OLED displays for future iPhones. Kuo states that the iPhone 8 OLED screen panel has been the “single most troublesome component for Apple in terms of bargaining power.”

Thus, to limit Samsung’s bargaining power, “We think Apple is therefore committed to having LGD geared up for its OLED iPhone display business in 2018 as it seeks to reduce supply risks,” Kuo says.

The analyst believes the company will procure 10% to 20% of the OLED screens it needs from LG by 2019, and he adds that this percentage will rise to 20% to 30% in 2020.

“This will in turn continuously boost Apple’s bargaining power on OLED prices,” Kuo noted.

Accelerating LG’s OLED display production

Samsung will be massively affected from this Apple-LG partnership, for the precise reason that it was assumed earlier that the Korean firm would be the exclusive OLED screen supplier for the iPhone starting with the iPhone 8. According to earlier reports, Samsung’s ability to supply large quantities and meet Apple’s quality standards made it the perfect choice for supplier of the iPhone 8 OLED display.

Apple’s investment in LG Display is reportedly worth 3 trillion won or $2.7 billion, according to South Korean publication Korea Economic Daily. The report claimed that the investment is for the sole purpose of producing OLED panels and is just an advance payment.

Further, Kuo states that LG and General Interface Solution (GIS), a Foxconn subsidiary, will work together, with LG using its expertise for the production of the display panels and GIS assisting in the lamination processes. GIS will also reportedly use its expertise in production troubleshooting and vertical integration, making it the perfect partner to develop LG in a major Apple supplier.

“GIS likely favored to team up with LGD in OLED for credentials in lamination, experience with MegaSite & advantages of vertical integration with Hon Hai,” Kuo says.

Apple is not the only smartphone maker that is investing in ramping up LG’s production process. Reportedly, Google invested 1 trillion won or about $900 million in LG’s OLED display production. Microsoft could also be one of LG’s first customers for foldable OLED displays.

In pre-market trading today, Apple shares were in the green.