Apple Inc. (NASDAQ:AAPL) is heavily dependent on Samsung, which is the only OLED supplier for its upcoming iPhone. Apple’s dependence on its arch-rival is only natural, given the quality of the OLED panels that the Korean firm has to offer. However, that kind of reliance has made things rosy for Samsung by giving it an upper hand in negotiations, according to trusted KGI Securities analyst Ming-Chi Kuo.
Apple paying a premium to OLED supplier
In a note to investors on Wednesday (via AppleInsider), Kuo mentioned that Samsung has a rare bargaining power against Apple, as it remains the sole supplier of screens for its flagship iPhone. Kuo estimates that Apple shells out between $120 and $130 per OLED unit, far more than the $45 to $55 per unit the company is paying for the iPhone 7 Plus’ 5.5-inch LCD screen.
“Apple is in urgent need of finding a second source of OLED [sic],” Kuo said.
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However, changing the supply source would take some time because other display makers would have to ramp up their manufacturing capacity for the next-generation display technology to meet Apple’s quality control standards.
LG an answer to Samsung’s growing importance
Meanwhile, to reduce its dependence on Samsung as its sole OLED supplier, the California-based company is reportedly holding talks with LG for OLED screens. However, LG is currently not in a position to boost its production of OLED screens until 2019. Citing sources aware of the matter, Bloomberg reports that LG would be able to manage only small shipments by the end of next year. Nevertheless, Apple and LG are still working on upfront payments and other details, and talks are reportedly in the final stage.
Apple wants the deal quick, but LG is facing challenges on the technological and machinery front. Procuring evaporation machines, which are key to making the displays, has become challenging after Samsung secured multiple devices from Supplier Canon Tokki Corp, explains Bloomberg. Although LG finally managed to acquire the machines, “it has to scramble to get the production yield sufficiently up to meet Apple’s requirements,” says Bloomberg.
LG may test its production lines for OLED displays in the second half of next year, and it usually takes about six months to start commercial production.
iPhone 8 suspense still continues
Kuo is still not sure if the upcoming iPhone will have a fingerprint sensor. The analyst believes that Apple might compromise on the fingerprint sensor for the model with the OLED display.
“We believe 3D Touch module could be unfavorable for scan-through performance of under-display fingerprint recognition,” Kuo said, adding “which is one of the main reasons why OLED iPhone may abandon fingerprint recognition.”
Nevertheless, all the suspense will hopefully be over next Tuesday when Apple is expected to debut the iPhone 8. The next-gen iPhone is expected to be priced well above its predecessor, the iPhone 7, which came with an LCD display. At the event on Tuesday, the iPhone maker is also expected to launch its Series 3 Apple Watch with LTE radio and an 4K Apple TV with HDR content support.
On Wednesday, Apple shares closed down 0.1% at $161.91. Year to date, the stock is up almost 40%, while in the last year, it is up more than 50%.