November 22, 2024

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[THE INVESTOR] LG Display on July 25 announced a whopping 9.6 trillion won (US$8.50 billion) fresh investment into OLED production. But the display maker remained mum over investors’ foremost concern -- a possible funding by Apple.

The US tech giant is reportedly considering providing financial support for LG Display, its long-time LCD partner, to beef up OLED production, with its first OLED iPhone debuting later this year. Amid tight supplies of OLED panels for smartphones, Samsung Display, the sole supplier for the upcoming iPhone, is enjoying a near monopoly with more than 95 percent market share. 

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Even though the two firms declined to confirm the funding plans, industry watchers say Apple may have already decided to invest in the Korean partner.

“If Apple’s funding had not been confirmed, LG Display’s management may have not decided on the huge spending,” an industry source said on condition of anonymity.

Considering the Korean firm’s cash reserves estimated at about 7 trillion won this year, the source said Apple’s investment would be more than 2 trillion won.

An LG Display executive also said during a conference call on July 26 that the company would secure some funding through a “strategic partnership” even though he didn’t clarify it would be with Apple.

“We cannot say much about the partnership but our investment principle is hedging risks,” he said in response to some concerns about the firm’s big spending in the coming years.

LG Display plans to invest 5 trillion won alone for the production of mobile OLED in Korea, while the remaining 4.6 trillion won will be spent on the larger OLED panels for TVs both in Korea and China.

Sources say the firm’s new production line, called E6, is likely to be dedicated to iPhone orders. About 3.5 trillion won is needed for an OLED production line with a monthly capacity of 30,000 units of the sixth-generation OLED mother glass.

“LG Display has been gauging the profitability of low-margin iPhone orders. With Apple’s financing, the firm would reduce risks while increasing profits,” said another source who wished to be unnamed.

LG Display has been making all-out efforts to become a secondary OLED supplier for Apple but the plans have been stalled as it is still struggling to meet the iPhone maker’s strict quality criteria, including the use of Canon Tokki’s vacuum machine, the most advanced OLED production equipment whose supply is extremely limited.

“Amid supply constraints of some key parts such as displays and chips for the iPhone 8, Apple now seems willing to pay more for stable parts supply,” said the source, citing its recent equipment purchase for Korean suppliers of rigid flexible printed circuit board, a key part that connects chips with each part -- such as the display screen and camera.

Sources say LG’s increased OLED production is also expected to help strengthen its negotiation power with equipment manufacturers, especially Canon Tokki that is seeking to diversify clients after years of close ties with Samsung.

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