Apple’s iPhone X boasts a cutting-edge screen bursting with crisp, bright images, the sort of eye-popping technology that gets consumers to line up to spend $1,000 or moreon the device.
But that line will be long and slow: Apple won’t start shipping the redesigned phone until Nov. 3, more than seven weeks after it was unfurled Tuesday.
The reason is as crystal clear as iPhone X’s new OLED screen. OLED manufacturers can’t build the screens fast enough as they increasingly pop up on smartphones, high-definition TVs, watches, virtual reality headsets and other gizmos. It’s an issue that not only is dogging Apple, costing it billions of dollars in short-term sales, but has tripped up Samsung, HTC and Google, too.
“It’s an industry issue,” says Ben Wood, an analyst at CCS Insight, a research firm headquartered in London. “There is a lack of manufacturing capacity for OLED and a lower yield of screens that meet (quality) standards.”
Apple declined comment on OLED delays.
As smartphones have become better video devices, OLED (organic light emitting diode) represents the natural evolution of display technology because it delivers a wider and richer color palette, as well as improved contrast and better viewing angles than LCD displays.
An OLED crunch has already muddied the releases of other consumer tech products in the last year.
Google’s Pixel phone, out last year, faced supply constrictions around OLED, as did HTC’s Vive VR goggles and the latest big-screen OLED TVs.
High demand, short supply
Parts makers can’t build the screens as fast as device manufacturers want.
OLED displays have been highly-valued in portable devices such as smartphones and wearables such as smart watches, including each series of the Apple Watch, because of their super-thinness and more efficient power usage. OLED displays are also used in virtual reality goggles because they have faster refresh rates to prevent blurred imagery.
As consumers spend more time watching video on their smartphones, manufacturers such as Samsung — which committed to OLED since its Galaxy S smartphone launched in 2010 and also makes the OLED screens in Apple’s $999 iPhone X — are choosing the displays over standard LCD screens because they improve color range, contrast and viewing angles.
The quandary comes down to profitability, says Tim Bajarin, principal analyst from Creative Strategies in San Jose, Calif. Most OLEDs displays are going into large-screen TVs — including LG’s 77-inch $20,000 4K TV launched this summer — that are more profitable for OLED vendors to produce.
While OLED makers also make money making smaller screens for iPhone X, those margins are smaller, Bajarin says.
A mini boom in OLED factories is next.
Samsung and LG alone plan to invest about $20 billion in OLED production in the next few years, and Apple will likely make its own investments, says Jennifer Colegrove, principal analyst at Touch Display Research in Santa Clara, Calif.
LG is expected to become another supplier for Apple’s iPhone X, according to reports from KGI Securities and others. The company has announced plans to invest more than $13 billion (15 trillion Won) through 2020 in OLED production at its plant in Paju, South Korea.
Samsung, the technology’s largest supplier and one of its biggest users, says it is in the preliminary stages of establishing a new OLED manufacturing site in Asan, South Korea.
Samsung Display’s capacity for flexible and rigid (glass-based) OLEDs is about 500 million smartphone panels this year, but will more than double by 2020, says Ron Mertens, founder and editor of OLED-Info, a web publication and services company focused on the OLED market.
Since smartphone makers last year became aware Apple was moving to OLED displays, they rushed to adopt them as well Chinese phone maker Oppo, for example, was forced to release a variant of its R9 model with an LCD screen last year because the needed OLED displays were in short supply, Mertens says.
In 2010, HTC had to switch from OLED to LCD screens for its Desire and N1 smartphones for the same reason, he says.
For smaller OLED displays, “basically you have to wait in line and Samsung takes the biggest orders at the price it wants to set,” says Wayne Lam, an analyst with IHS Market, a tech research firm. “That’s where supply constraint is driving both cost and limited capacity.”
Late to market
Typically, Apple announces its new iPhones in September and ships them about 10 days later — iPhone 7 and iPhone 7 Plus, for example, were introduced Sept. 7, 2016, and shipped Sept. 16.
IPhone X isn’t available until Nov. 3, the most significant gap since the original iPhone debuted in early January 2007 but didn’t ship until June 29 that year. Conversely, the more-modestly featured iPhone 8 and iPhone 8 Plus, which have improved LCD-based Retina HD displays, are available Sept. 22.
Consumers eager to fork over $1,000 for iPhone X must wait until Oct. 27 to order it, which means Apple must wait several more weeks to collect revenue from its top-of-the-line model.
OLED isn’t the only culprit. Apple is also increasingly relying on customer chips built in-house to bring new features such as facial recognition to iPhone X, say analysts.
“Getting (Apple’s) own chips up to volume is also an issue, although that is easier to solve then the shortage of OLED screens,” says Bajarin of Creative Strategies.
For consumers, investors and Apple executives, the waiting is the hardest part — and perhaps a respite for its smartphone rivals, especially Samsung.
The absence of iPhone X in October prompted analysts at financial-services firm Canaccord Genuity to reduce their iPhone sales estimates in the December quarter to 79 million from 84 million units. (Analyst Colegrove estimates Apple will be able to supply about 5 million iPhone Xs this calendar year.)
While that is expected to ding short-term sales of iPhone X, analysts such as Angelo Zino of CFRA Research, are convinced Apple’s diehard fans will remain patient and snap up the new phone, boosting Apple’s revenue in fiscal 2018, which begins Oct. 1.
Apple sold more than 210 million iPhones worldwide last year, generating iPhone revenue of $136 billion.
Then again, a paucity of iPhone Xs could actually work in Apple’s favor, creating greater demand and interest once it is available, counter some marketing experts.
“I’m not convinced it’s unplanned strategy,” says Ronald Goodstein, a marketing professor at Georgetown’s McDonough School of Business. “It has been proven time and time again in technical markets (such as Sony PlayStation 2) that pent-up demand creates excitement for a product. Owning an iPhone X will be a status symbol.”