By Takashi Mochizuki and Yoko Kubota 

Apple Inc. is developing production plans for its next iPhones that stress cheaper liquid-crystal displays, in a sign of consumers' sensitivity to the price of smartphones.

Apple expects LCD models to make up the majority of iPhone sales in its lineup to be released this fall, a greater proportion than analysts had anticipated, and plans to use the displays next year as well, said people involved in the Apple supply chain.

The production planning suggests the transition to a newer type of screen called organic light-emitting diode, or OLED, is likely to be slower than many in the industry believed a year ago, when the iPhone maker was preparing its first OLED smartphone. Analysts say demand was weaker than their initial forecasts for that phone, the iPhone X, due mainly to its price tag, which starts at $999.

Apple declined to comment. During a call with analysts last month, the company said the iPhone X was the best-selling of its eight smartphone models during the three months ended in March. But most iPhones it sells are still LCD models, analysts say. The top-of-the-line LCD models are the iPhone 8, starting at $699, and the iPhone 8 Plus, starting at $799.

A key reason for the iPhone X's relatively high price is the OLED screen. Samsung Display Co. is the main supplier of that screen and its production yield has yet to surpass the more widely available LCDs. LG Display Co. is also likely to supply some OLED displays for the iPhones to be released this fall, but it has also struggled to boost yield, said people at phone suppliers.

The OLED displays used in iPhones cost about $100 while the LCDs in iPhones cost about $40, estimates analyst Hiroshi Hayase at research firm IHS Markit.

Apple's new iPhone lineup coming this fall includes two OLED models and one LCD model, people familiar with the plan have said. Jusy Hong, an analyst at IHS, said he expected all three new models, including the LCD one, would share the iPhone X's look to give consumers who upgrade from one LCD phone to another a new feel.

Industry executives with direct knowledge of production plans said Apple initially wanted roughly equal production of the two screen types. Now, they say, Apple plans to make more of the LCD model, anticipating that consumers would lean toward the cheaper model.

OLED screens usually offer greater contrast than LCDs because they don't need a backlight, an advantage when watching movies.

Selling more of the lower cost LCD models could limit Apple's ability to increase average iPhone selling prices next year -- a factor investors watch closely. Average iPhone prices have risen 13% this fiscal year, helping lift Apple's revenue even as the number of units it sold stayed flat. Analysts currently expect average selling prices to be flat next year.

The Cupertino, Calif., company reported last month that its revenue from iPhones increased 14% to $38 billion in the quarter that ended in March.

People involved in the supply chain said they expected Apple to include at least one LCD model in its 2019 plans rather than shifting to an OLED-only lineup because they said Apple wanted consumers to have a more affordable option.

Display Supply Chain Consultants co-founder Yoshio Tamura said Apple would likely wait until 2020 or after to shift entirely to OLEDs because it needs more suppliers of the displays to keep a check on costs. In addition to Samsung and LG, Japanese maker Japan Display Inc. is working on OLED technology, but they aren't ready yet to produce large quantities.

One hardware engineer at Apple said the company has yet to find a clear advantage for OLEDs over LCDs.

Research firms have repeatedly cut forecasts for OLED shipments because of changing views on Apple's plans. However, Mr. Tamura, the consultant, said he still expected OLED use to grow, if at a slower pace than previously expected, because the displays give smartphone manufacturers more freedom in design.

Tripp Mickle contributed to this article.

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com and Yoko Kubota at yoko.kubota@wsj.com

 

(END) Dow Jones Newswires

June 15, 2018 10:23 ET (14:23 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Apple Charts.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Apple Charts.