Sharp Makes Long-Awaited OLED Foray, Wary of Big Spending

Japan's Sharp Corp unveiled its long-awaited move into the organic light-emitting diode (OLED) market on Wednesday as the Apple supplier looks to catch rival Samsung Electronics Co.

Sharp will offer OLED panels in its new smartphones later this year and plans to sell the screens to other manufacturers, although it has signalled it is wary about a rapid expansion in OLED as momentum for the thinner but more expensive screens slows.

The move comes as the Osaka-based electronics maker, a major supplier of iPhone liquid crystal display (LCD) screens, continues its recovery after being bought two years ago by Taiwan's Foxconn.

Sharp's OLED smartphones will initially go on sale in Japan, by far its major market after it slashed its overseas smartphone business. The company has not yet reached any deals for sales to other smartphone makers, a spokeswoman said at a launch function in Tokyo.

Sharp has so far invested JPY 57.4 billion ($505 million) to produce OLED panels in western Japan, less than a third of the planned 200 billion yen investment that was announced by Foxconn at the time of its acquisition in 2016.

Sharp executives have said a shift from conventional LCD screens to more flexible OLED screens has been slower than expected due to high prices, making the firm cautious about aggressive OLED capacity expansion in the near term.

"The momentum for OLED panels is waning compared to a year ago and is unlikely to pick up immediately," senior Sharp executive Katsuaki Nomura told reporters in July.

The slower acceptance of pricier OLED panels has also offered some relief to Japan Display Inc, another iPhone LCD screen supplier lagging behind Samsung and LG Display in OLED technology.

Japan Display has said it may push back the start of OLED commercial production, currently scheduled for 2019, while seeking a partner to help finance the launch of a mass production line. Analysts say it typically costs more than JPY 200 billion ($1.8 billion) to start a mass production line.

"To our surprise, our clients are not moving away from LCD panels," Chief Financial Officer Takanobu Oshima said in August.

South Korea's Electronic Times reported earlier this year that Apple has decided to use OLED screens in all three new iPhone models planned for next year, compared to two OLED models this year.

But industry sources have told Reuters that Apple would not entirely abandon low-cost LCD screens at least for next year.

Still, analysts say the OLED panel market could pick up again if improvements in production efficiency at Korean and Chinese panel makers lead to lower costs. OLED panels offer richer colours than LCDs and allow for foldable phones.