Samsung Display and LG Display are investing billions into MacBook and iPad OLED screens, but declining Mac sales raise profitability concerns.
The two companies want to dominate the market for medium-sized OLED panels by constructing new production lines for advanced displays. Rumors suggest they could be used to manufacture OLED displays for the iPad in 2024 and the MacBook in 2026.
Specifically, Samsung wants to build OLED production lines that would use eighth-generation glass substrates, with LG working on sixth-generation glass substrates. But a report from The Elec says the companies are concerned.
Sources reported that the two display panel manufacturers still need to make arrangements to purchase crucial equipment necessary to construct a Gen 8 OLED production line. To start supplying OLED panels made using these new facilities, they must order the equipment promptly, as producing display panel lines typically requires at least a year to complete.
The reluctance of Samsung Display and LG Display to invest in Gen 8 OLED may be due to concerns about profitability. The exact cost Apple will pay per OLED panel for use in MacBooks is undetermined, and it's uncertain how many units Apple intends to purchase.
The company reported a decline in Mac sales for the second quarter of 2023. Revenue generated from the Mac fell from $10.4 billion to $7.2 billion, while iPad sales exhibited a year-on-year decline, dropping from $7.6 billion to $6.7 billion.
Given that OLED displays on iPads and MacBooks will likely increase the sales price, the decrease in overall revenue implies that Apple may seek to negotiate lower unit prices when procuring them from Samsung Display and LG Display. Another contributing factor is the sluggish rebound of demand for IT products, which had surged during the two years of the pandemic but has now sunk as a result of the global economic downturn.
Sources report that the two manufacturers are informing their suppliers that they cannot pay a higher price for Gen 8 equipment than they did for Gen 6 equipment. For example, Japan's Canon Tokki, the maker of deposition machines for Gen 8 OLED lines, wants Samsung Display to pay the machine price and the development fee.
It may also be challenging for LG Display, which is currently operating at a loss, to invest billions into Gen 8 OLED production lines without any assurance of orders. In 2019, the company finished building a Gen 8 white-OLED line in Guangzhou for TV panels. However, there was no demand, so the factory remained idle for a year.