Over the past year, Apple (NASDAQ: AAPL) has been trying to bring on LG Display (NYSE: LPL) as a secondary supplier for OLED displays. Thus far for iPhone X, Samsung has been the sole supplier, which gives it much stronger negotiating leverage over the Mac maker. Apple has been trying to get pricing concessions from the South Korean conglomerate in recent months, and there has been concern whether or not LG would be able to meet Apple's rigorous quality standards as well as the deadline for volume production.

A report last month suggested that Apple was making progress with getting LG up to speed. It seems like Apple and LG have now inked that deal.

iPhone X was the first iPhone to adopt OLED displays. Image source: Apple.

Starting off small

DIGITIMES reports that Apple and LG have signed a supply deal that includes both OLED panels as well as traditional LCD displays in the second half of 2018, citing a Korean media report. LG will supply an estimated 3 million to 4 million OLED panels, a slightly higher range than the 2 million to 4 million OLED displays that Bloomberg previously said were to be supplied. LG is also expected to supply 20 million traditional LCD panels.

Apple is widely expected to have three new iPhone models in the pipeline for 2018, including two OLED models and one LCD model. The LCD model will be the more affordable of the trio, with the OLED iPhones being the two new flagships.

As LG's OLED manufacturing capacity ramps and yield rates improve at its fab, the supplier may be able to source the "majority of 6.5-inch OLED panel" orders with Apple next year, and could deliver upwards of 10 million OLED panels in 2019.

The benefits of having multiple suppliers

If accurate, that would be a very positive development for Apple's supply chain for a number of reasons. First and foremost is that it would mitigate some of the pricing power that Samsung is currently wielding over Apple. The importance of being able to pit two suppliers against each other to compete on price cannot be overstated. If Apple tries to make OLED iPhones more affordable in an effort to spur more sales, cost savings will be a critical piece of the puzzle.

Additionally, diversifying suppliers is always a smart move in terms of reducing risk. If something goes wrong at one supplier's operations for any reason, it's critical to have a backup.

Of course, the strategic benefits of having multiple suppliers for a critical component still largely rely on those suppliers being able to meet both volume and quality requirements. LG is still lagging Samsung in those departments, but LG is catching up.