Apple to Stick With Cheaper Screens as Consumers Balk at iPhone X Price Tag--Update
June 15 2018 - 10:38AM
Dow Jones News
By Takashi Mochizuki and Yoko Kubota
Apple Inc. is developing production plans for its next iPhones
that stress cheaper liquid-crystal displays, in a sign of
consumers' sensitivity to the price of smartphones.
Apple expects LCD models to make up the majority of iPhone sales
in its lineup to be released this fall, a greater proportion than
analysts had anticipated, and plans to use the displays next year
as well, said people involved in the Apple supply chain.
The production planning suggests the transition to a newer type
of screen called organic light-emitting diode, or OLED, is likely
to be slower than many in the industry believed a year ago, when
the iPhone maker was preparing its first OLED smartphone. Analysts
say demand was weaker than their initial forecasts for that phone,
the iPhone X, due mainly to its price tag, which starts at
$999.
Apple declined to comment. During a call with analysts last
month, the company said the iPhone X was the best-selling of its
eight smartphone models during the three months ended in March. But
most iPhones it sells are still LCD models, analysts say. The
top-of-the-line LCD models are the iPhone 8, starting at $699, and
the iPhone 8 Plus, starting at $799.
A key reason for the iPhone X's relatively high price is the
OLED screen. Samsung Display Co. is the main supplier of that
screen and its production yield has yet to surpass the more widely
available LCDs. LG Display Co. is also likely to supply some OLED
displays for the iPhones to be released this fall, but it has also
struggled to boost yield, said people at phone suppliers.
The OLED displays used in iPhones cost about $100 while the LCDs
in iPhones cost about $40, estimates analyst Hiroshi Hayase at
research firm IHS Markit.
Apple's new iPhone lineup coming this fall includes two OLED
models and one LCD model, people familiar with the plan have said.
Jusy Hong, an analyst at IHS, said he expected all three new
models, including the LCD one, would share the iPhone X's look to
give consumers who upgrade from one LCD phone to another a new
feel.
Industry executives with direct knowledge of production plans
said Apple initially wanted roughly equal production of the two
screen types. Now, they say, Apple plans to make more of the LCD
model, anticipating that consumers would lean toward the cheaper
model.
OLED screens usually offer greater contrast than LCDs because
they don't need a backlight, an advantage when watching movies.
Selling more of the lower cost LCD models could limit Apple's
ability to increase average iPhone selling prices next year -- a
factor investors watch closely. Average iPhone prices have risen
13% this fiscal year, helping lift Apple's revenue even as the
number of units it sold stayed flat. Analysts currently expect
average selling prices to be flat next year.
The Cupertino, Calif., company reported last month that its
revenue from iPhones increased 14% to $38 billion in the quarter
that ended in March.
People involved in the supply chain said they expected Apple to
include at least one LCD model in its 2019 plans rather than
shifting to an OLED-only lineup because they said Apple wanted
consumers to have a more affordable option.
Display Supply Chain Consultants co-founder Yoshio Tamura said
Apple would likely wait until 2020 or after to shift entirely to
OLEDs because it needs more suppliers of the displays to keep a
check on costs. In addition to Samsung and LG, Japanese maker Japan
Display Inc. is working on OLED technology, but they aren't ready
yet to produce large quantities.
One hardware engineer at Apple said the company has yet to find
a clear advantage for OLEDs over LCDs.
Research firms have repeatedly cut forecasts for OLED shipments
because of changing views on Apple's plans. However, Mr. Tamura,
the consultant, said he still expected OLED use to grow, if at a
slower pace than previously expected, because the displays give
smartphone manufacturers more freedom in design.
Tripp Mickle contributed to this article.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com and Yoko
Kubota at yoko.kubota@wsj.com
(END) Dow Jones Newswires
June 15, 2018 10:23 ET (14:23 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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