By Takashi Mochizuki in Tokyo and Eun-Young Jeong in Seoul 

An iPhone with a curved screen could be on store shelves as soon as next year.

Apple Inc.'s suppliers say they have been asked to increase output of thinner organic light emitting displays and submit prototype screens with better resolution than ones from Samsung to differentiate its models.

The Cupertino, Calf., company has been battling slowing smartphone sales and is under pressure to deliver a hit phone when the iPhone marks its 10th anniversary next year. An iPhone with an OLED screen could be introduced as one of several models to be unveiled, people familiar with the matter said, but would come with a higher price tag because OLED displays are more expensive to produce.

Apple may decide not to release the model because it is one of more than 10 prototypes being considered, said the people.

Apple declined to comment.

Rival smartphone makers from Samsung Electronics Co. to Xiaomi Corp. and Google Inc. have already shifted from using conventional liquid crystal displays to OLED screens because they are thinner, lighter, and allow for flexible designs. OLED screens don't require a backlight component to illuminate the screen. But they could be up to $50 more expensive to produce, according to analysts' estimates.

Long-term supply contracts with Apple could add billions of dollars to display makers' sales at a time when many are mired in losses. Research firm IHS Markit forecasts revenue in the OLED market for smartphones to surpass the LCD market in 2018 to reach $18.6 billion. Last year, revenue in the smartphone LCD market reached $20.8 billion compared with $10.6 billion for the OLED market.

Samsung Display Co., a unit of Samsung Electronics, currently dominates the market for smartphone OLED screens and is one of a few companies that can mass produce the displays. Samsung has long been a supplier of memory chips and other components to Apple but as the two companies compete in the global smartphone market, Apple has diversified its screen suppliers over the years. For that reason, Apple has been relying on LG Display, Japan Display and Sharp for supply of its retina displays, which use LCD technology.

But LG Display, Japan Display, and Sharp are behind Samsung when it comes to OLED investment. Samsung has spent close to $10 billion this year alone to expand its OLED production and research and development, while LG Display plans to invest close to $3 billion by 2018 to expand its production of smartphone OLED screens.

Both Japan Display and Sharp have faced financial difficulties, making it difficult for them to ramp up production. Japan Display is in talks with the Innovation Network Corp. of Japan, a government-backed fund, for a fresh bailout package. Sharp, mired in debt, sold itself to Foxconn Technology Group, the Taiwan-based iPhone assembler, for Yen388.8 billion ($3.5 billion) earlier this year. Since the acquisition of Sharp, Foxconn executives have also turned skeptical about OLED technology due to the steep manufacturing cost.

People familiar with the matter said Apple will likely rely on Samsung for most of its initial OLED needs but it wants LG Display, Japan Display and Sharp to ramp up production to have supplies ready for 2018.

One of the people said Sharp would need to spend more than $5 billion to supply enough OLED panels to Apple.

"We will make sample OLED screens, but I can't see them having the potential to become a big market," said Tai Jeng-wu, formerly a senior executive of Foxconn and now chief executive of Sharp, last month.

Investing in OLED technology comes with risks. It remains uncertain whether the technology will become mainstream. When it comes to image quality, there aren't clear advantages. Display makers haven't yet perfected flexible screens and it could take several more years before consumers can get their hands on a bendable phone, analysts say.

"Several players in the display industry already have the technology to make OLEDs foldable and rollable," said Jerry Kang, a display analyst at IHS Markit, though he was cautious about forecasting when they could be commercialized.

Components inside the panels such as the touch sensor and lens cover would restrict their flexibility, said Mr. Kang.

To hedge its bets, Japan Display has been marketing next-generation LCD panels it calls "Full Active" to Chinese handset makers. JDI says its new LCD panels, which use film rather than glass as the base material, would be similar to OLED when it comes to flexibility, picture quality and shelf life.

"We will invest in developing OLED mass-production lines because that is what our clients want, but the foundation of our business will remain LCD," said Japan Display Chief Executive Mitsuru Homma earlier this month.

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com and Eun-Young Jeong at Eun-Young.Jeong@wsj.com

 

(END) Dow Jones Newswires

November 28, 2016 05:02 ET (10:02 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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