Apple's search for better iPhone screens leads to Japan's rice fields

Apple’s quest to adopt advanced displays for its next-generation iPhone hinges on a single supplier in the Japanese countryside.
 
Canon Tokki, surrounded by rice fields in the city of Mitsuke in Niigata prefecture, has a near monopoly on the machines capable of making screens with organic light-emitting diodes, which enable sharp, vibrant displays that use less energy. A unit of Canon, the company of 343 employees has spent more than two decades perfecting the manufacturing equipment used by OLED screen makers.
 
But there’s a problem: Canon Tokki has a growing backlog even after doubling output in 2016. The potential production bottleneck is raising questions over Apple’s ability to feature OLED displays in next year’s iPhones, and whether the Cupertino, California-based company will be able to line up additional suppliers. The current wait for a machine, which can cost more than 10 billion yen ($85 million) each, is about two years.

 

“We are doing all we can to increase output and make that wait shorter,” said Chief Executive Officer Teruhisa Tsugami, adding that demand from display makers, including Samsung Display, LG Display and Sharp, will remain strong for the next three years.
 
Apple has been making preparations to outfit its next iPhone with OLED displays, the latest chapter in its now-familiar strategy of tempting people to upgrade by baking in new features. Over the years the improvements have included sharper screens, fingerprint identification, pressure-sensitive displays and custom-designed chips.
 
That push has also put a spotlight on suppliers of previously obscure technologies, testing their capacity to satisfy demand that drives sales of more than 200 million iPhones each year. A couple of years ago, Apple sought to use strong sapphire glass for iPhones, only to abandon the effort when a manufacturer couldn’t deliver enough of acceptable quality and went bankrupt. The scratch-resistant material is now featured on the Apple Watch.

 
Now OLED is the big goal. The technology has been included on top-end smartphones for years, including almost all of Samsung Electronics Co.’s high-end phones. While LCDs rely on a backlight panel, OLED pixels can glow on their own, resulting in thinner displays, better battery life and improved contrast. OLED screens can also be made on flexible plastic, allowing for a wider variety of shapes and applications.
 
“OLEDs aren’t just for flat areas, but can be used on edges, so smartphone makers will challenge themselves by building displays with new shapes,” Tsugami said. “These qualities in OLED will give it an advantage.”

 
The machines that build OLED screens are almost all made by Canon Tokki, which was founded by the current CEO’s father in 1967 (tokki means “special equipment” in Japanese). The company doesn’t disclose production details and earnings figures. Its current annual output capacity is less than 10 units, according to two people familiar with the matter, who asked not to be identified because the information is confidential.
 
To call Canon Tokki’s product a machine is something of an understatement. Each one is a vacuum production line 100 meters (328 feet) long. Glass panels, roughly the size of a large TV screen, are propelled by robotic arms through several chambers. Red, green and blue pixels are deposited on the surface by evaporating organic materials.

 
One of the challenges is in aligning the glass pane with a fine metal mesh that serves as a stencil for the pixels. Canon Tokki, which has been making OLED machines since 1993, has a patented mechanism that uses camera tracking to achieve a margin of error that’s less than the size of a human red-blood cell.