Apple orders an estimated 160 million iPhone 8 OLED panels, plans massive shipments

We’ve been discussing the expected features on Apple’s iPhone 8 for a few weeks now, including some specific features believed to be limited to the highest-end 10th anniversary model, such as a massive 5.8-inch end-to-end screen, integrated Touch ID functionality baked into the display, and an OLED panel instead of the LCDs all previous iPhones have relied on.

Samsung has signed an agreement with Apple to provide a full 160 million screens for the Apple iPhone 8, according to the Korean Herald (we’ve heard rumors it could also be titled as the iPhone X, though that’s scarcely confirmed). That’s surprising, for several reasons. First, Apple only shipped 211 million devices last year, and 231 million in 2015. If Apple is ordering OLEDs for a full 76% of its previous year in sales, it clearly expects the consumer response to be massive. But that’s surprising given that the iPhone 8/X’s flagship model is expected to cost $1m000. Even if the handset ships with a huge number of new and unusual features, how many people will be willing to pay four digits to get one? Apple’s average selling prices (ASPs) for the iPhone as a whole hit $695 this past quarter, in a new record for the company — but $1000 is a full 1.44x more than that.

SAMSUNG CSC

This implies one of three things: Either early reports that the Apple iPhone 8/X would be the only model to ship with an OLED are wrong, or Apple believes it will move a truly extraordinary number of iPhones, regardless of the price tag it slaps on them. Granted, this has proven to be true before. In the run-up to the iPhone 5S/5C, most speculation focused on how the iPhone would expand itself into new markets by targeting lower price points. Instead, most sales focused on the iPhone 5S. While Apple still offers an affordable small-screen phone in the iPhone SE, it never went down the iPhone 5C path (with its colorful plastic body and lower-end feel) again.

iPhone sales through 2016. Image by Statista.

The third possibility is the most prosaic but least exciting of the two. It’s possible that Apple’s larger display order from Samsung reflects the fact that the Cupertino-based company has decided to ship its first halo phone with OLED, but that $1,000 hardware will be a new price point that the company targets for at least two generations, and that OLEDs will be reserved for this flagship device. In this context, Apple’s decision to increase its OLED order simply means it intends to use the same panels in more than one phone generation. There’s nothing stopping companies from working out multi-year supply contracts at once, after all.

I’m genuinely uncertain which of these is the most likely outcome, mostly because there’s a case to make for all of them. Apple could also decide to take 1-2 halo features (OLED and wireless charging, for instance) and roll them out to the iPhone 8/X and the 7s Plus, while keeping the iPhone 7s on a traditional LCD.