Apple Inc. is in negotiations with Sharp Corp. to secure organic LED displays for the iPhone maker’s next generation of devices, according to a person familiar with the matter.
Any supply pact for organic light-emitting diode displays, would hinge on the Osaka-based firm’s output capacity, said the person, who asked not to be identified as the talks are not public. The talks stem from Apple’s desire to raise the number of OLED screen suppliers, the person said.
On Friday, Sharp announced it will invest ¥57.4 billion ($566 million) in the development of OLED production facilities, with the goal of starting output by June 2018. The funds will be used for equipment in Sharp’s factories in Mie and Osaka prefectures, and to deliver samples to customers, it said in a statement.
“Apple has unofficially or as a nod encouraged Sharp to go into it,” said Amir Anvarzadeh, Singapore-based head of Japanese equity sales at BGC Partners Inc. “Apple’s general strategy is to increase the competition on the supply side, and dilute the risk exposure to one company.”
Sharp spokesman Toyodo Uemura declined to comment on specific customers. An Apple spokesperson in Japan didn’t immediately respond to a request for comment.
Sharp’s capital investment in OLED is part of ¥200 billion the manufacturer had already committed to OLED technology, part of a strategic plan it adopted with new Taiwanese owner Foxconn Technology Group. Next-generation screens based on OLED technology promise more vivid images and less battery drain. Friday’s announced investment will be for smartphone displays, a Sharp representative said.
“This investment is in response to what Apple is doing,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “Production isn’t likely to begin until the second half of 2018, so the impact to profit won’t be until after that.”
Apple accounts for about 27 percent of Sharp’s revenue, according to Bloomberg’s supply chain analysis.
Earlier this year, the company agreed to accept a rescue package from Foxconn Technology Group, ending a takeover battle that spanned four years. Last month, it said its liabilities no longer exceed assets after receiving a ¥289 billion infusion.
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