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Samsung eyes place as Apple OLED supplier with investment push

SEOUL -- Samsung Electronics  plans to increase production of next-generation smartphone display panels by more than 50% this year with an eye toward supplying Apple and other manufacturers rushing to update their devices.

The South Korean electronics maker plans to spend around 8 trillion won ($6.82 billion) in 2016 to boost capacity by the equivalent of well over 200 million for smartphone panels using organic light-emitting diodes at a subsidiary's plant.

Samsung already holds a near-monopoly on OLED panels, and Apple apparently approached the company to supply such displays for an upcoming version of its iPhone. The U.S. tech powerhouse previously told parts suppliers that an OLED smartphone was in the works for 2018, but a partial 2017 release now is planned.

Bulking up OLED production will account for around 80% of Samsung's capital investment in its panel business this year. Combined investment in OLED panels and conventional liquid crystal displays has averaged nearly 5 trillion won annually over the past three years. Samsung is thought capable of currently producing OLED panels equivalent to far more than 300 million smartphone screens each year.

Samsung is fighting to protect its Galaxy smartphone line, the world's top seller by volume, against strong competition from Apple and its second-place iPhone series. But the U.S. company also sources some of its memory chips and other components from Samsung. The South Korean company aims to expand its components business, which provides earnings on par with those from smartphones, as well as spur growth in the OLED market, a key focus for the company.

Because OLED panels' substrates do not necessarily contain glass, the displays more easily can be placed on curved surfaces and otherwise altered, giving manufacturers more freedom in product design. The panels also offer sharper colors and a wider viewing angle than LCD screens. But challenges remain, including OLEDs' relatively short operational life.

Samsung already uses OLED panels in the majority of its smartphones, giving it rich expertise in producing the displays. The cost of making the panels is now thought to be on par with that for LCDs. The new wave of panel investment likely will be a further warning to Samsung's rivals in the market.

South Korea's LG Display, the world's leading producer of LCD panels, plans to invest more than 10 trillion won into expanding production of OLED television and other panels over the next several years. An entry into smartphone displays is eyed as well. Japan Display will spend 50 billion yen ($479 million) to build a new OLED production line in spring 2017, with mass production to start in 2018 or later.

Apple's introduction of OLED displays could spur other smartphone makers to do the same. Yet Samsung's production push carries a risk: Capacity after the upgrade will be much higher than the company's own estimated smartphone sales volume of 320 million units in 2015, creating the possibility of the massive investment becoming a drain on earnings.


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