November 24, 2024

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[THE INVESTOR] LG Display is expected to face further delay in its planned supply of OLED panels for iPhone as it is still struggling to ramp up the yield rate that meets Apple’s strict criteria.

According to industry sources on April 26, the company’s OLED shipment for iPhone could start from as early as 2019, about a year’s delay from previously planned.

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“Even Samsung Display is struggling to meet Apple’s requirements,” Jang Hyun-jun, an analyst at UBI Research, told The Investor, adding due to the tricky panel production the upcoming iPhone could miss some highly-anticipated features such as bezelless screen and on-screen fingerprint scanning.

“Considering LG Display will start its first full-scale OLED production for smartphones in the third quarter this year, it will take more time to elevate the yield rate.”

Despite its leadership in larger OLED for TVs, the display-making unit of LG Group has remained a minor player in the smartphone panel market that is dominated by its compatriot rival Samsung Display with more than 95 percent market share.

LG Display has been supplying LCDs for the iPhone over the past decade but the lucrative business is at risk as Apple plans to use OLED for all new iPhones from next year starting with the partial adoption this year. Samsung is currently the sole panel supplier.

After years of preparations, the company plans to start producing OLED panels from the third quarter, possibly in August, but the first shipment will go to its sister firm LG Electronics and China’s Xiaomi, not Apple.

“Apple is hoping to diversify its OLED suppliers but is unwilling to compromise on product quality,” the analyst said. “The iPhone maker will decide a secondary supplier after closely monitoring LG’s yield rate in the initial phase.”

The key issue is securing Canon Tokki’s manufacturing systems whose supply is extremely limited.

Japan’s Canon Tokki has a near monopoly in giant vacuum machines that are crucial for producing OLED screens. The firm has developed the machines in close partnership with Samsung since 2007. Of seven machines that will be produced this year, Samsung has secured five units, while LG Display and China’s BOE have purchased only one unit each.

Due to the machine’s scarce supply and high price, LG Display has teamed up with Korea’s Sunic System to build the manufacturing systems. But Apple is skeptical about the local tie-up because both companies are producing the sixth-generation OLED panels for the first time.

“Apple is asking LG Display to produce panels using Canon Tokki’s machines only,” an official of a display parts maker said on condition of anonymity. “The panels using Sunic machines are likely to focus more on orders from Chinese handset makers.”

LG Display installed the Sunic system at the E5 plant in Gumi, North Gyeongsang Province, last year, while the Canon Tokki machine is expected to be installed at the newest E6 plant in Paju, Gyeonggi Province, possibly for Apple orders.

“Canon Tokki plans to produce nine units of the machines next year. While Samsung has already secured five units, LG’s production will largely depend on how many machines it can purchase,” the official added.

By Lee Ji-yoon (jylee@heraldcorp.com)