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Apple deal may be prize for Sharp’s OLED push

The long-time partners said to be in talks about screens for future iPhones, as Japanese firm’s new owner, Foxconn, spends heavily on OLED

After clinging stubbornly to LCD displays for its iPhones and iPads – albeit increasingly advanced ones – Apple looks set to convert to OLED for the next generation of its handsets. The problem with OLEDs is that the market is so dominated by Samsung, with whom Apple has been trying to loosen its supply chain ties (with limited success) given their fierce competition in smartphones. This is sending Apple back to its old partner Sharp, now part of Foxconn, which assembles many of the iDevices.

Sources told Bloomberg that Apple – which has sourced some of its LCD displays from Sharp over the years and has sometimes helped prop up the ailing Japanese firm – is currently in negotiations to secure OLED displays. Its aim is to increase the number of suppliers it has, in order to guarantee stocks of screens for future devices.

On Friday, Sharp announced plans to invest Yen57.4bn ($566m) in the development of OLED production facilities, with the goal of starting output by June 2018. That would be too late for first releases of the next iPhone, (which is reportedly going to skip the ‘s’ generation and go straight to the iPhone 8 name).

Sharp said it would invest the funds in equipment in its factories in Mie and Osaka, and to deliver sample products to customers.

“Apple has unofficially or as a nod encouraged Sharp to go into it,” Amir Anvarzadeh, head of Japanese equity sales at BGC Partners, told Bloomberg. “Apple’s general strategy is to increase the competition on the supply side, and dilute the risk exposure to one company.” Apple accounts for about 27% of Sharp’s revenue.

Neither company would comment.

Sharp’s investment in mobile OLED is part of a wider Yen200bn strategic plan, under the new ownership (and financial weight) of Foxconn, to increase its OLED activities as the display market shifts heavily in that direction, in order to compete more powerfully with Samsung, LG and Chinese providers.

Earlier this year, the Japanese company agreed to accept a rescue package from Foxconn Technology Group, which wants to diversify its contract manufacturing business into other, high value areas of the chain, and to increase its overall business with Apple. Last month, Sharp said its liabilities no longer exceed assets after receiving a Yen289bn injection of funds.

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