Apple decided to equip this year's lineup of iPhones entirely with OLED panels. LG Display, which has endured six consecutive quarterly operating losses, is expected to fulfill much of this extra demand. The company will supply 20 million OLED panels this year, or five times the volume from the previous year, a source said.
LG's arrival heralds a new era of competition in OLED, the start of a battle for market share like the one that has prevailed in older liquid crystal displays.
Suh Dong-hee, LG Display's chief financial officer, expressed confidence that the company will improve its finances in the second half of this year.
"We plan for our dedicated smartphone OLED panel factory in Paju to operate at full capacity," Suh told reporters Thursday.
Samsung supplies the majority of OLED panels for iPhones, but its order volume this year apparently has risen only slightly to around 60 million units. Samsung and LG Display declined to comment on the details of individual orders.
Samsung holds an 81.3% market share in small and midsize OLED panels, mostly used in smartphones, data from British researcher Omdia shows. LG Display comes in a distant second at 6.7%.
Apple aims to diversify suppliers after paying steep charges to Samsung for lower-than-expected iPhone sales. The U.S. tech giant is obligated to pay Samsung compensation if the South Korean supplier's panel shipments fall below a predetermined level. Apple triggered that provision for two consecutive years.
"This contract was possible because Samsung attained a virtual monopoly on [OLED] supplies," said Yoshio Tamura, president of Asian operations at U.S.-based Display Supply Chain Consultants. "This would be hard to do with LCDs, in which diversified procurement is possible."
Samsung obtained 1.1 trillion won ($915 million) in one-time gains from key U.S. clients, South Korea's Daishin Securities found in its analysis of April-June earnings. Stock analysts and industry insiders estimate that Samsung received more than $800 million in breach-of-contract compensation from Apple alone last year.
Apple has long sought other OLED suppliers. LG Display panels appeared in some iPhone 11 models last fall. But in the summer prior, LG Display failed to improve the production yield rate of panels and fully meet delivery targets, an incident that reportedly enraged Apple's procurement manager. Afterward, the South Korean company managed to improve its yield rate of OLED panels, multiple suppliers say.
Samsung serves as a supplier of principal iPhone components, yet also represents Apple's archrival in smartphones. Apple is supporting LG Display's OLED development in part to reduce procurement costs.
OLED screens display vivid images, and the bendable panels allow more design options for smartphones. With Apple moving almost entirely to OLED -- the low-cost iPhone SE series will retain liquid crystal display screens -- other global smartphone manufacturers are expected to quickly follow suit.
Overall shipments of smartphone LCD panels have dropped in recent years, and OLED panels will overtake liquid crystal displays in 2024, Display Supply Chain Consultants projects.
Yet LG Display has no guarantee that Apple will continue to show it favor. The third-ranked rival, China's BOE Technology Group, has improved its technology in part by recruiting former Samsung engineers. Apple has started assessing production quality at BOE plants in the Chinese cities of Chengdu and Mianyang.
Though the Chinese company is not anticipated to supply OLED panels for this year's iPhone models, insiders speculate that BOE's product may be adopted next year. That scenario would diminish LG Display's role as the main alternative to Samsung.
In the panel industry, those with deep pockets hold sway. Samsung has built a massive war chest through its semiconductor business, while BOE enjoys support from the Chinese government. It remains to be seen whether LG Display can keep up in the research and development race.