August 17, 2012 — Barclays Capital provides its analysis of Apple iPhone 5 display manufacturing — will the phone’s display suppliers be able to achieve acceptable yields and throughput on the new in-cell architecture?
iPhone 5 builds were delayed and smaller-than-expected during Q3 2012, due to yield issues with the new in-cell touchscreen architecture. On top of this, the touch panel display industry is up against low profit margins and increased competition for business, according to a recent report.
"Over the next few years, in-cell, on-cell, and sensor-on-cover touch technologies will surpass the add-on type projected capacitive touch," according to Jennifer Colegrove, PhD, Vice President of Emerging Display Technologies at NPD DisplaySearch. However, today, in-cell display is the key bottleneck of iPhone 5 production. Barclays sees both LG Display (LGD) and Japan Display (JDI) likely to start small-scale volume production in August, with full-scale ramp-up in September. However, uncertainties remain regarding Sharp’s execution. Will Sharp be able to execute as required for full scale of iPhone-5-related memory demand?
The capacity of each panel maker (LGD, JDI, Sharp) is estimated at around 7 million units of the touchscreens per month, with an initial yield ratio around 80%. Expect an additional yield loss of about 10-20% at the final assembly process. Given this, Barclays estimates iPhone 5 production could reach around 15 million units in Q3 and 45 million units in Q4. Any kind of potential miss in execution at panel makers could result in lower-than-expected iPhone 5 production for the rest of the year.