Samsung lands huge iPhone OLED contract

Samsung Display signed a 3 trillion won ($2.6 billion) contract to supply organic light-emitting diode (OLED) displays to Apple, according to industry sources quoted by multiple local media reports.

The report came after earlier market rumors that Apple would switch to OLED panels from its current liquid crystal displays (LCD) for future iPhone models. Sharp and LG Display are the primary supplier of iPhone’s LCD screens. The display manufacturer neither denied nor confirmed the report on Friday, saying that issues regarding contracts with its clients are not announced.

“We are not allowed to talk about deals with our clients,” a Samsung Display spokesperson said.

Under the deal, the Samsung affiliate will provide 100 million units of 5.5-inch OLED panels for the iPhone 7s starting next year.

To fulfill the Apple order, the panel maker plans to build a new, dedicated production line at its plant in Asan, South Chungcheong.

Adding a separate line is inevitable given the sheer number of iPhones sold. Apple also may want to enhance security with a new line since around 90 percent of the panels manufactured at the plant go to Samsung Electronics, the archrival of Apple in the smartphone business.

Should the agreement go as planned, it will cement Samsung’s position as the top provider of OLED screens for mobile devices. It currently holds more than a 90 percent market share in the small and medium OLED screen market, though LG is a dominant player in OLEDs for television.

OLED technology can deliver more accurate color and thinner displays compared to conventional panels such as plasma and LCDs. But market watchers predict that the flexibility of the advanced panel may be key to Apple’s interests.

Analyst Ming-Chi Kuo of KGI Securities, a financial services group covering the Asia-Pacific, said that Apple will entirely revamp its iPhone lineup in 2017.

Kuo predicts a “completely new form factor design” for future iPhones, with more narrow bezels and a “more comfortably grip.”

OLED screens are becoming popular with other smartphone manufactures such as Microsoft, which makes the Lumia smartphone.

Market research firm IHS forecast the market share of OLEDs in TVs and smartphones to increase from 36.9 percent this year to 46.9 percent in 2018.

The good news for Samsung Display was very bad news for LG Display, Apple’s current panel supplier. Its shares plunged by 6.7 percent on Friday.

LG Display reportedly supplied 40 percent of the panels for iPhones.

If Apple taps Samsung as a major panel supplier, LG Display could face huge revenue and profit losses. According to its annual report in 2015, 28 percent of LG Display’s sales, or 7.95 trillion won, came from small and midsize LCD screens used in smartphones.

Apple is known as the largest customer in the smartphone LCD segment.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]