Apple’s Shift from LCD to OLED in a Competitive Market

Apple’s supplier, Japan Display Inc., recently announced that it will seek to raise up to $990 million in new funds to cope with Apple’s shift from LCD to OLED for the iPhone.

According to Reuters, a large portion of the funds raised by Japan Display will come from external fundraising, with rumors suggesting that a group led by the China Silk Road Investment Fund will provide significant financial support. The remaining funds will be raised through preferred stock to refinance existing debt.

Japan Display has undergone multiple cash injections in the past, including two in 2016 and 2018, the latter to secure orders for the iPhone XR. As Japan’s largest display manufacturer formed by several major panel companies, it is facing fierce competition from Chinese and Korean manufacturers. As LCD screens gradually fall out of favor among mainstream high-end models, they must force themselves to transition from LCD to OLED, despite the relatively slow pace of this change.

Apple began its transition to OLED screens with the iPhone X in 2017, and both the iPhone XS and XS Max used OLED screens in 2018. To ensure the supply of OLED screens, Apple effectively secured the largest portion of OLED screen orders in the supply chain. It is expected that by 2020, the entire iPhone series will adopt OLED screens, and screen manufacturers from China, Korea, and Japan are ramping up their OLED production lines in anticipation of future orders.

Currently, the situation is slightly less optimistic as iPhone sales are sluggish, and the iPhone XR, which uses an LCD screen, is considered the best-selling model. Apple may not return to its previous sales levels until the fall of 2019. Suppliers also face a harsh winter due to declining sales.

Samsung’s dominant position in small to medium-sized OLED screens makes Apple uneasy, so supporting new manufacturers is inevitable, and BOE is one of the suppliers Apple is considering.

The existing iPhone screens have a separate touch-sensitive layer located at the very surface of the display. However, Samsung’s new generation design—integrated touch flexible OLED screens—no longer requires a separate touch-sensitive layer. Such screens are lighter, thinner, and potentially cheaper to produce. Reports indicate that Samsung recommended the new screens to Apple last year.

According to the Korea Herald, Chinese screen manufacturer BOE is also investing in the same technology. BOE is the largest screen manufacturer in China and has already secured orders from Huawei, hoping to gain favor with Apple. The company has produced screens for iPads and MacBooks and previously spent billions of dollars promoting itself to Apple, even proposing to establish a dedicated production line for iPhone screens.