The newest version of the Apple iPhone, which is expected to be announced later this month, is reported to include a new in-cell Liquid Crystal Display (LCD) screen, which integrates touch sensors into the LCD module, making the screen much thinner. This weekend, a published article in The Wall Street Journal (paid subscription or free metered view) indicates that Sharp Corp. one of three designated suppliers of the new LCD, has been challenged to meet its end of August mass production milestone because of continuing production ramp-up problems. The other two reported suppliers, Japan Display and LG Display have already started shipping LCD screens in-volume and the WSJ reports that the Sharp delay raising some questions is to whether Apple will have enough components to meet initial demand.

The WSJ is quick to note that a track record of delay is not uncommon for Sharp, as earlier this year the supplier was initially late on shipments of screens for the latest iPad, but Apple was able to overcome any shortages. Apple declined to comment to the WSJ regarding the Sharp report.

Meanwhile, the reported equity investment in Sharp from Hon Hai Precision, the parent of Foxconn, is reported to be delayed.  Hon Hai announced in March that it would take a roughly 10 percent equity investment in Sharp and would take partial control of a LCD display factory near Osaka.  The latest business media reports indicate that continuing financial losses by Sharp have motivated Hon Hai to seek a renegotiation of their agreement.  This planned investment was highly important for Sharp since the company has been transitioning as a producer of LCD screens for televisions to one of smartphones and tablets.

In the broader scope of LCD component sourcing strategy, Apple has been fostering a broader set of LCD suppliers for its new products to buffer the impacts of Samsung, who was previously a high volume LCD supplier for Apple. The current three LCD suppliers of Japan Display, LG Display and Sharp, are the consolidated industry survivors from previous competitive battles with Samsung. All three have been positioned by Apple to support the company’s high volume output requirements while eliminating any significant dependence on Samsung. It will be interesting to observe how the strategy will evolve, especially if Sharp continues to struggle with volume production.

Bob Ferrari