Samsung Display Co. is highly likely to exclusively supply organic light-emitting diode (OLED) display panels to Apple’s iPhones for at least two years to come.
According to display industry sources on December 18, Samsung Display is expected to monopolize the supply of OLED panels to Apple’s iPhone 8, the first iPhone ever to feature a curved OLED screen to be released as early as the third quarter next year, until the end of 2018.
This has to do with the current market situation in which the other display panel manufacturers are unlikely to produce that type of panels until 2018 with Samsung Display currently enjoying a share of more than 95% in the smartphone OLED panel market. LG Display Co. is currently constructing the E6 line, which produce small and mid-size OLED panels, in Paju, Gyeonggi Province, with the investment of nearly 2 trillion won (US$1.68 billion) and the E5 line in Gumi, North Gyeongsang, with the investment of 1 trillion won (US$842.36 million). Japan Display is preparing for mass production of OLED panels for Apple by acquiring JOLED Inc., an OLED display producer created by Panasonic Corp and Sony Corp.
In the meantime, Samsung Display has accumulated experience and know-how by supplying smartphone display panels to Samsung Electronics, its parent company. Under the circumstances, it is not easy for Apple to find an alternative. In addition, Samsung Display is expected to invest no less than 15 trillion won (US$12.64 billion) in its facilities this year and next year, which is way more than the other companies’ capital expenditures.
Apple has stick to its strategy to procure key components from a large number of suppliers, but it will have difficulties to find other suppliers for OLED panels other than Samsung Display for a while. This is largely due to the fact that Samsung Display has built its unrivaled technological competence by supplying displays to smartphones for its parent company Samsung Electronics. In addition, Samsung Display’s investment in facilities overwhelm other competitors. Kim Dong-won, analyst with Hyundai Securities, said, “Samsung Display’s investment in its facilities this year and next year will reach 15 trillion won (US$12.64 billion).”
Industry watchers expect that Samsung Display’s operating profit next year will rise sharply to some 4 trillion won (US$3.37 billion) as Apple is expected to sell more than 50 million iPhones with OLED displays next year alone. Accordingly, Samsung Display’s ratio to Samsung Electronics’ operating profit will skyrocket. J.P. Morgan said in its recent report, “Apple‘s next-generation iPhone with OLED display will sell 55 million units from July to December next year. Samsung’s display business will contribute 15 percent and 19 percent of the group’s total operating profit in 2017 and 2018.”
Samsung Display's operating profit this year is estimated at 1.85 trillion won (US$1.56 billion). The figure accounts for about 6 percent in 28 trillion won (US$23.59 billion) of Samsung Electronics’ operating profit forecasts during the same period.