Apple Reportedly Inks Deal With Samsung And LG For OLED Display Production

It seems that Apple has decided to tap both Samsung and LG Display to build OLED displays for its next generation iPhone handsets, presumably the iPhone 7 and iPhone 7 Plus. While not written in stone, Samsung is likely to produce a larger percentage of displays for Apple because it's already setup to mass produce OLED panels, though the relationship between the two is tricky at best.

There's the obvious tiff between Apple and Samsung over patents, which is an ongoing dispute that recently saw Samsung cut Apple a check for $548 million. Now Apple wants an additional $180 million to cover interest and supplemental damages. Meanwhile, Samsung is trying to get the dispute heard by the U.S. Supreme Court.

Samsung OLED

The legal proceedings and disagreements over patents have no direct bearing on the OLED display deal, though indirectly, it might be cause for both sides to play hardball during negotiations. That's already playing out to some extent. It's expected that Samsung would produce the bulk of Apple's OLED panel orders because it's already in position to mass produce the displays, but disagreements over various details could skew the workload.

In order to mass produce OLED displays for Apple, Samsung and LG will invest a combined $12.8 billion into their operations over the next 2-3 years. Apple will pay the two firms a portion of their substantial investments, though the price it's willing to pay for displays is much lower than what Samsung wants. While OLED displays are traditionally more profitable than LCDs, the price Apple is willing to pay would give Samsung just a one-digit percent margin.

Beyond costs, Apple also has a tendency to be pretty involved on the manufacturing side. That's another point of contention with Samsung, which doesn't want its competitors to know too much about the production of the flexible OLED panels it will provide.

It's not a trivial concern, especially since it was recently reported that Apple opened a secret OLED display facility in Taiwan. Apple's long term plans aren't known, but it's understandable that Samsung is wary about letting Apple learn too much about its production methods.