LG Display is the new star in the OLED constellation. With Samsung’s production capacity stretched to its limits due to iPhone 8 requirements, its South Korean peer electronics giant LG and its display unit are now under the spotlight. Apple is keen on LG supplying OLED screens for its 2018 iPhones, but Alphabet might want Google Pixel 2 to have OLED, which means in 2017.
Last week, we reported that Alphabet offered LG Display a significant investment if it could keep the OLED supply flowing without a hitch, and Apple’s talks with them predate that.
That means LG is facing quite a dilemma right now – if they accept Google’s offer, then Apple’s offer could be withdrawn, since Foxconn now owns Sharp Display, which also makes OLEDs. The problem is with production timelines but, if Apple is pushed into a corner, it may decide to hand a big contract with an investment attached just so it can get its OLEDs for 2018 iPhone models from suppliers other than Samsung and LG.
On the other hand, if they sign up with Apple, then Google’s business goes bye-bye, most likely.
The biggest challenge that everyone has right now is production and capacity. While Samsung and LG are facing capacity issues, Sharp Display and Japan Display aren’t ready to go to manufacturing yet. These are the only four big players in the game that have the potential to supply companies like Google and Apple.
If LG Display plays it smart, it can take advantage of its negotiating position and agree to both deals, but in limited quantities. If they can somehow match their capacity with this year’s Google Pixel 2 requirements, while quickly ramping up their capacity for 2018 iPhones and possibly Google Pixel 3, they’ve got massive growth on the horizon.
However, that’s easier said than done. On the bright side, 2018’s iPhone and Google Pixel 3 will only be released late in the third quarter or early fourth quarter. That gives them some additional time to ramp up production. The down side is that ramping up to that level could take up to a year – valuable time that they may not have for all the testing and quality checks ahead of delivery.
That’s why it’s a pickle. On the one hand, it’s a huge, huge business opportunity for any company when it’s being wooed by two of the most well known smartphone makers in the world. On the other hand it is extremely risky because there will be contract clauses that penalize them heavily for screwing up. That’s obvious when you’re dealing with the likes of Alphabet and Apple – two of the world’s most valuable brands.
Just today, word got in via Business Korea that LG Display is going to make a decision regarding Apple’s request for iPhone 8 panels by June, which could automatically mean a decision for or against Alphabet’s offer for Google Pixel 2 OLED displays. This would supplement the order from Samsung, and would also indicate that Samsung has reached a supply limit for 2017:
LG Display “received a request to take part in a bid for receiving an order for small and medium-sized OLEDs from Apple. At the end of June, we will make a decision based on OLED production technology, capacity and the accompanying investment volume in an extraordinary board meeting.”
So LG Display has bought itself a couple of months to mull over the possibility of handling two major clients – and two major smartphone brands: Google Pixel 2 and iPhone 8.
The only problem here is that LG Display doesn’t have the experience of high-volume production. But if they let these deals slip, it could spell doom for the company as the world moves rapidly from LCD to OLED for digital devices.
Closer to June, we should hear something about either or both deals. We’ll keep you posted.
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