The deal will guarantee Apple a supply of an additional 3 million displays for the upcoming tablet device over an unspecified amount of time, according to a high-ranking industry representative that recently spoke with The Korea Times.
"The most expensive component in the iPad is the display and touch-screen interface that costs $80 for all models," that person said. "The 9.7-inch display is more than twice the size of the iPhone 3GS screen and costs five times as much."
A little over a year ago, Apple entered into a similar 5-year, $500 million deal with LG Display Co. for flat panel displays through the 2013 calendar year. Although details of the arrangement were scarce at the time, it's now reported that agreement has been expanded to $800 million to cover the supply of 10 million iPad displays.
Apple chose LG as its primary iPad display screen supplier because it favored the in-plane switching (IPS) technology offered by South Korea-based electronics manufacturer. Although it's not as sharp as vertical alignment (VA) technology currently used by Samsung and Sony on their display panels, it offers a broader 178-degres viewing angel an faster response times.
As such, Samsung has agreed to hop on the IPS bandwagon and is currently in a development phase that will enable it to increase production of IPS displays that it plans to ship in bulk to "an American company" believed to be Apple, according to people with knowledge of the situation.
The move brings the total number of iPad display panels on order by Apple to 13 million, underscoring the Cupertino-based company's strategy of forming multi-supplier agreements for critical components that form the foundation to its highest-volume and most popular product offerings.
By sourcing key components from more than one partner, Apple builds a layer of protection into its supply chain that affords it leeway in the event that one supplier runs into problems filling orders. It also increases competition in the marketplace for the company's business, helping to drive down wholesale prices.
Meanwhile, an anonymous Samsung executive has also let slip that the company is "in deep talks" to supply its flat panel displays for Apple's upcoming 4G iPhones and iPads.
"As far as I know, Apple will use [our] LCD panels for its next iPhone models," the executive said. "We are receiving related orders from Apple,"