Kwon Oh-hyun, Samsung president for chips, LCDs

By Kim Yoo-chul

Samsung Electronics and LG Display, the world's two largest makers of liquid crystal displays (LCDs), are close to securing big orders from Apple, industry sources said.

Apple is looking to order advanced screens for the next version of its immensely popular tablet computers.

The deal comes as Apple has been looking to reduce its dependence on Samsung to provide key components such as flash memory chips, processors and LCDs.

Samsung, which enjoys a dual strength in parts and finished products, doubles as a

Steve Jobs

friend and foe for Apple. The latter has filed a patent infringement suit against the former for allegedly copying the look and feel of its iPhones and iPads in its own offerings.

Apple has started quality testing Samsung and LG’s LCDs at one of its laboratories in China. Samsung and LG were required to produce screens with better picture quality and density, according to sources, who anticipate the testing process will be completed during the third quarter.

``Apple’s upcoming iPad 3 will feature an improved display to support quad extended graphics (QXGA), a display resolution of 2048×1536 pixels with a 4:3 aspect ratio to provide full high definition (HD) viewing experience,’’ said a source close to the talks.

``Apple has traditionally preferred to use the same providers of the same parts for the same device, even as they evolve to different versions. I don’t see any fundamental change to that approach.’’

A possible letdown for Samsung is that Apple appears to have no interest in using its flat screens based on organic light emitting diodes (OLEDs).

Although Samsung has been investing heavily in related technology, electronics makers have been reluctant to embrace OLEDs, which have shorter life spans and are easily contaminated.

Although OLEDS are starting to be used in some digital products, most of them are small devices with five-inch screens or smaller.

``Another drawback is the current OLED technology is not at the level to realize a full HD viewing experience, which is important for tablets,’’ said the source.

The imminent deals would assure that Samsung and LG continue to be the biggest providers of flat screens to Apple for the foreseeable future.

Samsung and LG are two of the few LCD makers that are at ease with highly-advanced LCD screens.

The companies are both capable of providing high-resolution QXGA screens up to 9.7 inches, thanks to advanced production technology based on the use of low temperature polysilicon.

``Pixel density, a barometer for viewing quality, should be increased to over 280 pixels-per-inch (PPI) to meet Apple’s stiff requirement for screen viewing,’’ said another source, who predicts that Taiwanese LCD giant CMI will see smaller orders from Apple than its Korean rivals.

Gary Sohn, head of LG Display’s public relations office, and Song Chul-gyu, a Samsung PR officer, both declined to comment.

``Apple will be looking to boost the shipments of its upcoming iPad to distance itself further from tablet rivals like Samsung,’’ said Kim Byeong-ki, an analyst at Kium Securities.

LCD makers have been struggling to cope with falling panel prices due to the slow recovery of the global economy, which has depressed demand for electronics products such as flat-screen televisions.

Samsung and LG have been cutting their LCD output by more than 15 percent to prevent further prices falls, according to company officials.

Apple's complicated strategies

While Apple and Samsung continue to maintain a close relationship in screens, chips are a different story.

Apple has been buying a staggering amount of DRAM, NAND flash and other components from Samsung, which also makes Apple-designed A4 and A5 processors on a foundry basis.

However, Apple is recently shifting much of its memory chip orders to Taiwan Semiconductor Manufacturing Company (TSMC).

Apple is currently testing its future iPhones and iPads with processors manufactured by TSMC, which is also the world’s largest contract chipmaker, much to Samsung’s dismay.

Samsung officials insist the chances are ``very low’’ that Apple’s deteriorating link with Samsung in chips will eventually affect its appetite for Samsung screens.

Things are less complicated for LG, which is euphoric about the increasing number of major handset vendors becoming LCD customers.

``We aren’t affected significantly by Apple’s changing approach. Apple is first and foremost about product quality, and while it may find other manufacturers to provide customized chips for its new products, the same can’t be said about LCDs,’’ said a senior Samsung executive, asking not to be named.