Apple Reportedly Shifting to OLED, Suppliers Hit

Apple Inc. (AAPL) plans to use high-end, organic light-emitting diode (OLED) screens in all three of its new iPhone models set to be launched next year, according to a South Korean media outlet.

Electronic Times, citing unnamed industry sources, reported that the Cupertino, California-based company is keen to use the technology, which delivers sharper and brighter images than the liquid crystal displays (LCD) that currently appear on most iPhone models, even in its entry-level smartphones. At present, only the iPhone X features an OLED screen.

Jerry Kang, senior principal analyst at IHS Markit, told CNBC that Apple has been seeking to improve iPhone displays to differentiate them from rival offerings. However, Kang also warned that the company could face challenges generating demand for more costly OLED smartphones.

iPhone X sales have fallen behind previous iPhone models, which IHS Markit mainly attributed to higher selling prices caused by expensive OLED panels. (See also: Apple iPhone X: World's Best-Selling Phone in Q1.)

Appleinsider previously reported that Apple was negotiating with Samsung Electronics Co. to reduce the costs of OLED panels after deciding to use the technology in two of its three new models set to be launched later this year.

Apple Suppliers Impacted

Following the release of Electronic Times’s report, shares in Japan Display tumbled 7.97%. The Japanese company, one of the main suppliers of LCD screens to Apple, has struggled to compete with its rivals in OLED production and is reportedly seeking to raise capital so that it can start mass-producing the high-end panels from 2019.

Meanwhile, LG Display (LPL) shares surged 5.23% on Tuesday morning. Apple is reportedly considering using the South Korean company, one of the world's largest manufacturers of smartphone displays, as one of its OLED screen suppliers.

“If Apple uses OLED for all models for next year, that could raise hopes for LG Display to take a slice, as Apple may want to diversify its sources for OLED supply,” said Lee Won-sik, an analyst at Shinyoung Securities in Seoul, according to Reuters.

Samsung, which has been locked in a legal battle with Apple, is currently the exclusive provider of OLED panels for the iPhone X. Its shares fell 1.91% in morning trading. (See also: Samsung Has to Pay Apple $539M for Infringing Patents.)