Barclays Capital‘s Ben Reitzes this afternoon offers an update on how he sees things progressing with the so-called “in-cell” display technology that Apple (AAPL) is rumored to be using for its next iPhone, expected this fall.
The Street has recently speculated that Apple has experienced problems with getting adequate yield of the parts in time for introduction of the device.
Reitzes writes that his colleagues in Asia covering electronics manufacturers and component suppliers suggest there is now less risk to the iPhone after Apple has improved or simplified some of the steps involved in using in-cell:
In a note published Monday in conjunction with our colleagues in Japan and Asia ex-Japan we noted that after several weeks of fine tuning its touch algorithm, Apple has improved the sensitivity of its in-cell displays through a firmware update. In addition, Barclays Japan Display Analyst Yuji Fujimori expects Sharp to start in-cell display production in early September and Korean analyst SC base believes that LG Display is close to receiving Apple�s approval for in-cell display production as well. Asia ex-Japan LCD Display Analyst Jamie Yeh notes that TPK is no longer being pushed by Apple to provide lamination services for the iPhone. Therefore, we believe that the outlook for in-cell display supply has greatly improved. Estimates for in-cell production are unchanged at 10-15 million in-cell screens industry-wide in 3Q12 however we see fewer downside risks to Apple iPhone 5 shipment schedule.
Reitzes thinks there may be limited availability of the iPhone in September, if it is released then, but a “strong ramping” of the device in the December quarter. He models Apple selling 23.4 million iPhones this quarter and 40.5 million in Q4. He thinks volume may go even higher in the March quarter, to 42.6 million, perhaps including China introductions of the phone.
In related news, Macrumors‘s Eric Slivka today writes that Apple was granted a patent on the in-cell technology, which is designed to reduce the bulk of screens by putting touch sensors into the display gass through a special manufacturing process designed by Apple.
Reitzes maintains an Overweight rating on shares of Apple and a $750 price target.
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