Apple to Get OLED Screens From LG as Second Source

Apple Inc.’s (AAPL) efforts to lower the cost of iPhones boasting the organic light-emitting diode screens (OLEDs), just got a lift after landing a second source for the bendable screens.

Citing people familiar with the matter, Bloomberg reported that Apple will be able to reduce its reliance on OLED screens from Samsung Electronics by inking a deal with LG Display Co., a rival South Korean maker of screens for mobile devices. LG will supply Apple with 2 million to 4 million screens, which is small compared to the Cupertino, California-based company’s sales. 

Still, Bloomberg said that by landing a second source it can better negotiate pricing with Samsung, which will still provide the lion’s share of OLED screens. After all, the main reason the iPhone X launched with a starting price of $999 was because the bendable OLED screens are much costlier than LCD-based ones. What’s more, if the relationship proves successful, Apple could purchase large volumes of the screens from LG to go into upcoming models of the iPhone. (See also: Apple to Lower Prices on New Crop of iPhones: MS.)

Second Source Necessary For Apple, Market

Jerry Kang, senior principal analyst at IHS Markit, told Bloomberg that its crucial for Apple to secure a second supplier because it reduces its reliance on Samsung and at the same will further drive general market adoption of OLED screens. Bloomberg noted that the OLED screens from LG will be used for one of the iPhones that is expected to be released in the fall. (See also: Apple Led Company Stock Buybacks During Q1.)

iPhone X Proved Too Pricey or Many

The move on the part of Apple to secure a second source comes at a time when it is reportedly focusing on the lower-priced LCD screens for more of its new lineup of smartphones. Citing people involved in Apple’s supply chain, The Wall Street Journal reported earlier this month that LCD iPhones will make up the majority of the fall lineup, which is more than analysts had been expecting.

The iPhone X has proven to be too expensive for consumers, hurting sales of its latest smartphone. Apple did say in May that the iPhone X was the best-selling of its mobile phones during the March quarter, but analysts told the Journal that LCD models are selling the most given the lower price point. The iPhone 8 starts at $699 while the iPhone 8 Plus is priced beginning at $799.