This Isn't Why Apple Is Building a 6.1-Inch LCD iPhone

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Nikkei Asian Review, which regularly publishes accurate information about future Apple (NASDAQ: AAPL) products in advance of their introductions, said Apple is planning a new iPhone with a liquid crystal display (LCD) and a metal case for next year to serve as a lower-cost option alongside an updated iPhone X and a larger-screen iPhone X successor.

This, in itself, isn't news, as multiple reputable publications and analysts have indicated the same. Instead, what I found interesting was the following comment from analyst Eric Chiou that Nikkei Asian Review included in the report:

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Samsung Display is believed to be the sole manufacturer of the OLED displays found on this year's premium iPhone X while other suppliers, like Japan Display, supply the displays for the iPhone 8 and iPhone 8 Plus.

Here's why I'm not convinced Chiou's reasoning holds up.

Samsung is building displays for Apple's best phones

The reality is that until other display manufacturers are able to meet Apple's display quality and performance requirements, Apple will need to rely exclusively on Samsung for the supply of display panels for any OLED-based iPhone models.

It is true that Samsung Display is part of the larger Samsung Electronics conglomerate, which encompasses Apple's primary rival in the premium smartphone market, Samsung Mobile. However, the reality is that the OLED-based iPhones are Apple's most technologically sophisticated devices, and as such, information about future OLED-based iPhones is easily the most sensitive from a competitive perspective.

Think of it this way: If Samsung Mobile wanted dirt on Apple's next-generation iPhone technology plans, do you think that it'd want to know all about the lower-cost model with an LCD, or do you think it'd want to know about the technology inside the more premium models with Samsung Display-supplied OLED displays?

The answer, in my view, is clearly the latter.

So by working with Samsung Display on the iPhone X's impressive display and by working with Samsung Display on the displays for next year's two OLED models, Samsung Display knows a lot about the display technologies that'll be used in those phones.

Apple had better hope Samsung Display won't share that information with Samsung Mobile.

The real reason for the LCD iPhone

The real reason, then, that Apple is probably planning to use an LCD for a lower-cost large-screen iPhone next year is simple: cost. Apple wants to build compelling products at lower price points, and LCDs are cheaper for Apple to buy than OLEDs.

Part of that is due to the nature of the technology itself. OLED is hard to manufacture, and the panels Apple is reportedly going to use in the LCD iPhone are substantially lower resolution than the ones it'll use in the OLED models. Another part of it is due to Samsung Display's near-monopoly on the mobile OLED market, giving Samsung significant pricing leverage over Apple.

Indeed, considering that the high-end mobile phone industry is shifting away from LCDs and toward OLEDs, mobile LCD makers are probably eager to get any business they can get, which could mean even more attractive pricing on high-quality, iPhone-grade panels for next year's LCD iPhone.

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Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.