Apple is sticking with its old display technology. That spells a blurry outlook for some screen makers.
The U.S.’s pre-eminent smartphone maker is planning to keep using liquid-crystal displays in its iPhone lineup into next year, according to The Wall Street Journal. The majority of their handsets this year will likely stick with LCD.
This sort of decision can make or break an industry’s fortunes. The iPhone X, the world’s best-selling smartphone last quarter, uses a newer technology in its screens called organic light-emitting diodes, almost all of which are made by Korean giant Samsung. Analysts reckon Apple will eventually use OLED in all its iPhones.
That transition seems to have been postponed, possibly because Apple doesn’t want to become too beholden to Samsung. Near term, that is good news for other Asian screen makers, who can expect the U.S. company to keep ordering the LCD screens they make. Market expectations that their product would lose Apple’s favor sooner has hammered the shares of big LCD producers such as South Korea’s LG Display—down 43% in the past year—along with Japan Display and Sharp, both down nearly 30%.
Still, there is a risk that Apple’s delayed switch will push back the time frame for those screen makers to earn a return on their own heavy investments in OLED technology. LG, for example, has invested, or plans to invest at least $4.5 billion. And even if Apple is still going to be buying LCD, its prices are headed downward, thanks to intense competition.
All this means investors are best off staying away from Asian LCD screen makers, even if they get a temporary boost from Apple’s latest plans. Sharp, in particular, looks expensive: Its enterprise value is nine times its expected earnings before interest, taxes, depreciation and amortization versus around three times for LG Display and Japan Display, according to S&P Global Market Intelligence.
Japan Display may fare better than the other two as it has a more advanced type of LCD screens, which it says can surpass some of OLED’s advantages at lower cost. The company raised $320 million in April to “respond to higher demand expected in the second half.”
The screen blues aren’t over yet for LCD makers.
Write to Jacky Wong at JACKY.WONG@wsj.com