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By Yoko Kubota in Beijing and Takashi Mochizuki in Tokyo 

Apple Inc.'s efforts to line up a second supplier for its high-end smartphone screens--and reduce its dependence on Samsung Electronics Co.--have hit a hurdle because LG Display Co. is struggling to make them, according to people familiar with the matter.

South Korea's LG Display is working to boost production of organic light-emitting diode displays in hopes that it can provide some of the screens for iPhones set to be released later this year, the people said. OLED screens tend to be thinner and more flexible than those typically used in smartphones.

However, manufacturing problems have caused LG to fall behind the schedule that many suppliers follow before beginning mass production for iPhones, which usually starts around July, the people said.

As a result, opinions within Apple are divided on whether LG Display can become a second source of OLED displays for the upcoming iPhones, one of the people said. The OLED screens currently used on Apple's iPhone X model are made by the display division of the electronics giant Samsung, which both dominates the market for these displays and is Apple's top rival in smartphones.

"Because Samsung is Apple's competitor, it's an issue for Apple if it has to continue buying the component from Samsung," said Hiroshi Hayase, a Tokyo-based analyst at IHS Technology.

Apple and LG Display declined to comment.

The Samsung-made OLED display is among the most expensive components in the iPhone X, costing Apple about $97 out of $376 in total estimated cost per device, according to an analysis by Fomalhaut Techno Solutions, a Tokyo-based consultancy.

Apple's reliance on a single supplier for the screen means it has less bargaining power over its pricing--one reason for the iPhone X's steep $999 price tag, analysts said. The price turned off some customers, causing demand to fall short of expectations and forcing Apple to cut orders for parts.

Another OLED display supplier could help Apple lower costs for the component, boosting Apple's profit margins or giving it leeway to cut phone prices.

Apple is planning to release three types of iPhones this fall, people familiar with the matter said. One is a 6.5-inch phone with an OLED screen. Another is the 5.8-inch OLED model--the same size as the iPhone X. Apple also plans to release a 6.1-inch model with a liquid-crystal display, known as LCD.

The company plans to manufacture roughly 100 million of the new iPhones this year, about half of which will have OLED screens, the people said.

LG Display is the leading maker of large-size OLED panels used in television sets. But the manufacturing of large-size panels and smaller smartphone panels involve different technologies, which LG has yet to nail down, one of the people said.

LG Display was recently ordered by Apple to go through a third round of prototype production for the OLED smartphone screens, an extra step that most suppliers don't go through for many components, the people said.

It currently is expected to supply as much as 20% of OLED displays for this year's new iPhones, according to supply-chain analysis by Susquehanna International Group. Samsung is expected to supply the other 80% and could supply more should LG Display's production capabilities fall short.

Tripp Mickle in San Francisco contributed to this article.

Write to Yoko Kubota at yoko.kubota@wsj.com and Takashi Mochizuki at takashi.mochizuki@wsj.com

(END) Dow Jones Newswires

April 20, 2018 05:44 ET (09:44 GMT)

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