Why Apple Inc. Didnt Include OLED Displays on iPhone 7 and iPhone 7 Plus

By Markets Fool.com

Image source: Apple.

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With this year's iPhones, Apple (NASDAQ: AAPL) made a number of enhancements to the displays -- a critical part of the user experience -- relative to last year's models. The new displays support the much wider DCI-P3 color gamut for better color saturation and are substantially brighter -- 25% brighter, according to the iDevice maker.These changes imply that Apple is using an all-new liquid-crystal display (commonly abbreviated LCD) backlight in this device, as brightness and color gamut in an LCD are largely dictated by the backlight.

To the disappointment of some, Apple did not use an Organic Light Emitting Diode, or OLED, display in the new iPhone. OLEDs have a number of advantages over LCDs, with two obvious ones being that they can deliver substantially enhanced contrast relative to LCDs, improving image quality, and the fact that they can be curved as in Samsung's (NASDAQOTH: SSNLF) recent flagships.

Apple is expected to use curved OLED displays on its next-generation iPhones, but this year, Apple stuck to LCDs, knowing full well that doing so could put it at a marketing disadvantage relative to Samsung and other smartphone makers. And to be blunt, Apple isn't stupid.

The question, then, is "why?"

It looks like an issue of technological readiness

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It may seem as though Apple merely buys displays and has very little involvement with the underlying technology that goes into them. Apple's secrecy means that it doesn't talk about this sort of thing, but the company has hired a substantial number of display technologists. These engineers likely work closely with the major display manufacturers to build products that meet Apple's exacting specifications.

In order for Apple to choose to adopt OLED displays, it needs to be sure that the new displays will bring with them all of the advantages traditionally associated with OLEDs while at the same time not regressing in any key way relative to the best LCDs.To be blunt, I don't think Apple could have adopted OLEDs this year without making significant sacrifices.

For example, according to AnandTech's testing, the display found on the Note7 -- arguably the best smartphone OLED display in the market today -- only achieves a maximum brightness of 359 nits. The iPhone 6s Plus, which Apple rates at 500 nits of brightness, actually manages to achieve 582 nits in AnandTech's tests.

The iPhone 7 Plus' display, which Apple rates at 625 nits of brightness, could very well achieve over 700 nits of brightness if the delta between Apple's rating and measured brightness holds for the iPhone 7/7 Plus as it did with the iPhone 6s/6s Plus, and even iPhone 6/6 Plus.

If, with the iPhone 7/7 Plus, Apple is able to achieve best-in-class color/grayscale/saturation accuracy (the key metrics that AnandTech tests) combined with an extremely bright display, then I would argue that using a similar panel to the ones found on the Note7 or S7/S7 Edge would have been an unacceptable regression in a number of key ways.

Apple Watch 2 paints a bright picture for the 2017 iPhone

Interestingly, Apple has already adopted OLED displays in the Apple Watch, and at its Sept. 7 product launch event, talked up the display improvements on the second-generation Apple Watch. In particular, the iDevice maker claims that the Apple Watch 2's display is extremely bright and capable of emitting 1000 nits of light. If Apple and its display partner(s) are able to scale this technology up for use on next year's iPhones, then next year's iPhone displays could be unequivocally better than this year's.

Implications for Apple's iPhone biz

I suspect that many of Apple's competitors will increasingly shift OLEDs in a bid to differentiate their offerings over the coming months. Even if those displays are inferior to Apple's LCDs in a number of key areas, those competitors will likely use the "we have OLEDs and Apple doesn't" marketing angle to try to maintain/gain share at the high end of the smartphone market.

Unfortunately, this is a marketing disadvantage that Apple is going to have to live with over the course of this product cycle. Fortunately, though, once Apple transitions to OLEDs, its competition won't be able to use this against it -- something that could help accelerate any potential share gains that the iPhone 7 and 7 Plus manage to deliver for the iDevice maker -- should they help it gain share, at all.

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Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.